Thursday, December 15, 2005

SP Up, The Others Down: Unexpected Result

Well, here's a piece of humility for the doc. The last eight days in SPY have been up by about .75%. During that same time, the NASDAQ (QQQQ) and Russell 2000 (IWM) have been down. This has only occurred six times since 2003 (N = 737 trading days). I would have bet my bottom dollar that the outlook the next eight days would have been subnormal. Nope.

Eight days later, SPY was up five times, down only once for an average gain of 1.27%. This compares favorably with the overall sample average of .37% (434 up, 303 down). Eight days later, QQQQ and IWM were up by an average 2.03% and 1.86% (4 up, 2 down, both cases). This compares with their sample averages of .56% (412 up, 325 down) and .66% (429 up, 308 down), respectively.

The sample size (N = 6) is far too small for reliable statistical inference, but the point here is that--at least since 2003--a lagging broad market has, if anything, caught up to an outperforming S&P, not the reverse.