Yesterday was only the eighth day the S&P 500 closed down by more than 1% in the last six months, or 126 trading days. To put this in some historic context, at deep oversold lows, the number of trailing days down over 1% is in excess of forty. Single digits readings are more consistent with intermediate to longer-term tops in stocks.
Our work relating this equity metadata to the Federal Reserve's tapering suggests we should expect more 1% down days over the course of this year. We have modeled out the Fed's taper trajectory, calculating the 3-month increase in the Fed's balance sheet through this year, and the relationship suggests that if the Fed pushes ahead with its tapering, the occurrence of 1% down days should pick up.