Worrisome Signs Series: S&P 500 signals turmoil ahead

US benchmark stock index, S&P 500 has been declining since 25th of October and it has declined for the past seven days,  facing a looming rate hike from the US Federal Reserve, uncertainties surrounding the US election (the prospect of a Trump win), and dwindling bond prices. This is not a regular phenomenon. If it declines again today, it could be a major warning of turmoil ahead.

There have been only five cases in past three decades, where the S&P 500 has declined for eight consecutive days and all of them were followed by financial turmoil and in some cases grave financial crisis. The very last time, the S&P 500 has declined for eight consecutive days is back in 2011/12, during European debt crisis and US budget crisis. Before that, it was 2008 and we all know, what happened then.

S&P 500 is marginally higher today so far and we would maintain a cautious outlook as seven days of decline are not common too. There have been seven cases in past 30 years.

The chart was created in FXCM marketscope