Putting Two Consecutive 1% Down Days into Perspective

Several prominent commentators have noted the tendency of this market to immediately bounce back from minor losses to achieve new cycle highs in short order. Some have termed this the "buy the dip" mentality among investors. Given that we've now had two consecutive 1% down days for the S&P500 we thought we'd see just how frequently this phenomenon has occurred in the past so we can put the current environment into perspective. Are investors really "buying the dip" at every opportunity or is this behavior fairly common?

In order to answer this question we have created the chart below in which we calculate a six month running sum of consecutive 1% down days for the S&P 500 (blue line, right axis, inverted). The idea is that low numbers indicate investors are "buying the dip" because 1% down days are infrequently followed by another 1% down day, and vice verse. Incorporating today's results we are now showing a grand total of 1 for the number of consecutive 1% down days over the last six months. This is a low reading according to history, but what is more striking is that the S&P 500 has not experienced more than two consecutive 1% down days in a six month period since May of 2012. In other words, almost every single dip in the market has been met with aggressive buying (or at least not more selling). This is extremely unusual behavior and has not been seen since the run-up from 1994-1998.