Horror month for markets: What happens next...

Richard Coppleson

The ASX 200 this October was sold off -6.08% (but at it low was down -9.4%). That made it the 14th biggest fall in 25 years, here we look at what has happened in the month after these types of moves over this time frame.

Looking at the 19 biggest falls since 1993

  • The average fall for them was -7.8%.
  • Then the next month the average move was -0.1%.
  • So on that it looks like the weakness continues... (but read on)

Ok BUT

  • in the GFC in 2008 we were in a super bear market & given we are not in one of those now
  • So I have excluded 2008 falls (and rises) to get a “cleaner” picture of how markets react in normal times (yes these falls are quite normal in markets).

So now ex-2008 (GFC moves)

The 14 major falls in the ASX 200 in the last 25 years show

  • This October the fall is the 12th biggest fall in 25 years.

Looking at the 14 biggest falls since 1993

  • The average fall in the horror month for them was -7.2% - which is slightly greater than the -6.1% we just had last month
  • BUT ...the following month the average move was a rally of +1.7%

Chart of 14 largest falls (yellow bar) & then what it did the following month (blue when up & red when down)

In the 14 years we saw that the following month it was

  • Higher 11 times or 78% of the time
  • The average move in the 14 years was up +1.7%.
  • But in the 11 years that it was “up” then the rise was a huge +3.38%

Look at the chart the rebound the following month (blue lines) are all decent moves….

So a market rally in November is on...

So if we get a rebound, which I believe we will this November – the ASX 200 will be a lot higher (but most of this gain will come in the last 2 weeks of November – I’ll explain why that is so later this week).

I believe that the Small Ords will lead the way higher, with many smashed out growth stocks - showing extraordinary rebounds in November & into December.

More insights

This article is based on excerpts from The Coppo Report contributed to Livewire by Richard Coppleson, Director - Institutional Sales and Trading, Bell Potter. You can find out more by clicking here.


Comments

Please sign in to comment on this wire.
Avatar fallback

snejalex

it would appear that if we are not in a GFC type mood then Novemeber will be small up. If we are in the same type of mood as GFC period then November will be (even further) down. i note that overall debt levels are even higher now than they were at outset of GFC

Join the conversation