Market Stats, Fun Facts, and Why You Can Ignore Them

When it comes to the stock market there’s a tremendous amount of fun facts and stats that are often shown in pretty little tables and infographics. If you tweet out a good one you’ll likely get a couple retweets and maybe a new follower. But what good are they? People love counting and that passion has seeped into how traders view the market.

An interesting point got raised in a meeting I was yesterday about the length of time the S&P 500 ($SPX) has been above its 200-day Moving Average. It’s something like a 400+ days. Cool right? Apparently the S&P 500 has never been above its long-term moving average for more days than right now. Remember this period of time ladies and gentleman, you’ll probably want to tell your grand kids about it one day.

There are two problems with this type of data. The first occurrence was a record and probably was super exciting but that doesn’t mean it’s significant. The, now, second longest period of time the S&P has been above its 200-day MA was between 1995 and 1996, lasting 385 days (a tie with ’63-’65). Once it got above the previous high of 355 days (which was in the late 1950’s) I bet traders were going crazy. How could the market stay above its 200-day MA more than 355 days?! Then it got to 370…375….380… and finally touched its precious moving average on the 385th day, tying the previous record…The longest streak for the S&P in history!!!!!!

So what are you suppose to do with this information? Well since the market was above its long-term moving average for so long it probably came crashing down after the 385th day, right?

Nope. The S&P 500 kissed its 200-day Moving Average and kept chugging higher. The equity index actually rose another 40% over the following year. Now of course this is just one example. But the point is fun market facts are more times than not just noise.

It seems like each time I check Twitter or StockTwits I see people counting the number of days the market has or hasn’t done something. Maybe that’s why people converge on Times Square on New Year’s Eve. We as a people just love counting things….whether it be when the ball will drop and mark a New Year or how many days an equity index advances.

Are these stock stats fun? Yes. Will I be basing my market bias on them? No.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.