As I was working on a weekday market wrap video for my members the other day, I happen to have Jim Cramer’s Mad Money show on the TV…turned down low. I usually don’t watch the show, but this time I did over hear him talking about the August selloff.
He was basically telling people to relax, it’s August. The market is doing its August type of price action. So it got me wondering… is having an August selloff, just normal August type action.
August Selloff
I decided to review the moves of the S&P 500 Index (SPX) between the close on the last trading in July and the last trading day in August. I looked at the last 30 years. Why the last 30 years? Well that covered the 1987 crash and everything since then.
Here’s what I found:
- the average move on the SPX during August was – 0.8%
- the worst decline was -14.6% in 1998
- the biggest gain occurred in 2000 at +6.1%
- from 1987 thru 2009 there were 8 out of 23 years, where the SPX moved +/- 3% or greater
- but from 2010 thru 2016 there were 5 out of the 7 years that had moves of +/- 3% or greater
- and of those 5 years, 4 were declines averaging -5.0%
Last 7 Years
So given the volatility of the last seven years it’s not surprising for people to think this might be normal August activity. Three of the four big August declines occurred during two major Elliott Wave corrections in this last bull move. Intermediate Wave (2) was a running flat from 2010/2011 and Intermediate Wave (4) was a zigzag from 2015/2016.
We’ve had our two corrections in a five wave Elliott Wave up cycle and we’ve completed (or very close to complete) the 5th and final wave. If the wave cycles are complete, which is my preferred count, then we are starting down now in the next bear cycle.
And if that is the case, it would not surprise me to see the move start with an August selloff (intraday high on August 8th) and set everyone up (nature of the market) by having a lot of volatility in August over the last 7 years.