NOTE: This Post was originally going to be published April 15 but I then decided to wait for the markets to open and close on April 16 and then assess things.
On April 15, 2013, the markets closed significantly lower, which most have theorized is a “panic response” to the unfortunate tragedy surrounding the Boston Marathon. Shortly after 2:30 PM, the SP 500 ETF, SPY, traded an abnormally high number of shares to the downside, adding credibility to this theory. It continued lower until the market closed.
This type of event, is considered a Black Swan Event, a concept discussed by Nassim Taleb. This type of event is unpredictable and sudden.
Evening SP 500 futures found support, and did not trade lower than the prior daytime session. This is somewhat reflective that calmer minds came into the picture and bought SP 500 futures (versus sell them). Typically, the evening futures market is predictive of the next day regular stock market, which will be 04-16-13.
I feel it is important to take a look at the SP 500 index, going back to Sept 11, 2001, the worst act of terrorism on US Soil. See below chart
It can be seen that after the initial panic response to this major terrorist event, the markets subsequently rallied, which would be a response not typically expected. It should be noted that the market subsequently did crash, but this is not associated to 9-11, but to larger problems which existed big-picture, as most will remember many “stock market scandals” during the 2000-2002 era, such as Enron, WorldCom, Tyco, and others. So 9-11 did not cause the markets to crash, and as noted here, once things calmed down, the markets rallied after 9-11.
Lets take a look at tonight’s SP 500 futures, as of 10:20 PM Central time 04-15-13. You can see how the futures have “found support” and not traded lower than the day session.
On April 16, the markets rebounded, likely due to people reaching some reasonableness from a trading standpoint with the Boston Marathon situation. All indexes rebounded strongly, with heavy volume and the indexes closing up. Mid and Small-Cap stocks responded best on April 16.
The SP 500 closed at 1574, which is slightly below its previous all time high of 1576 set in 2007. While the markets remain volatile and sensitive, I am remaining 100% S-Fund for the present time.
Thank You – Bill Pritchard
