{"id":201294,"date":"2025-01-07T12:00:00","date_gmt":"2025-01-07T17:00:00","guid":{"rendered":"https:\/\/ibkrcampus.eu\/campus\/uncategorized\/do-stocks-take-the-elevator-up-or-down\/"},"modified":"2025-01-08T09:55:17","modified_gmt":"2025-01-08T09:55:17","slug":"do-stocks-take-the-elevator-up-or-down","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/securities\/stocks\/do-stocks-take-the-elevator-up-or-down\/","title":{"rendered":"Do Stocks Take the Elevator Up or Down?"},"content":{"rendered":"\n<p>There\u2019s an adage that sticks in my head, but it\u2019s hard to pin down.&nbsp; The saying is some variation of \u201cstocks take the stairs to the roof and the elevator to the basement.\u201d&nbsp; The implication is that stocks tend to grind higher when they rally but fall quickly when sentiment turns.&nbsp; Most market adages are rooted in fact, but when we thought about the market\u2019s recent moves, we decided to question this one.<\/p>\n\n\n\n<p>The basic premise does seem to have some resonance.&nbsp; We all can think of long periods when stocks rallied, often with low volatility and bear markets when stocks dropped sharply.&nbsp; Of course, the latter periods are relatively few and far between, especially during the past fifteen years or so (with the exception, of course, of early 2020).&nbsp; But I\u2019ve found myself writing more frequently about sharp rallies, often fueled by short-term options traders.&nbsp; So, I decided to compile some evidence.<\/p>\n\n\n\n<p>I checked the frequencies of one-day S&amp;P 500 (SPX) moves of greater than 1%, 2% and 3% since 2010.&nbsp; Over that period, there appears to be some truth to the adage, though it seems to have become less accurate in recent years.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-spx-1-day-moves-in-various-timespans\"><strong><em>SPX 1-Day Moves in Various Timespans<\/em><\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"227\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/01\/Picture1-7-1100x227.png\" alt=\"SPX 1-Day Moves in Various Timespans\" class=\"wp-image-201295 lazyload\" data-srcset=\"https:\/\/ibkrcampus.eu\/campus\/wp-content\/uploads\/sites\/3\/2025\/01\/Picture1-7-1100x227.png 1100w, https:\/\/ibkrcampus.eu\/campus\/wp-content\/uploads\/sites\/3\/2025\/01\/Picture1-7-700x145.png 700w, https:\/\/ibkrcampus.eu\/campus\/wp-content\/uploads\/sites\/3\/2025\/01\/Picture1-7-300x62.png 300w, https:\/\/ibkrcampus.eu\/campus\/wp-content\/uploads\/sites\/3\/2025\/01\/Picture1-7-768x159.png 768w, https:\/\/ibkrcampus.eu\/campus\/wp-content\/uploads\/sites\/3\/2025\/01\/Picture1-7.png 1400w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/227;\" \/><\/figure>\n\n\n\n<p>Source: Interactive Brokers<\/p>\n\n\n\n<p>Past performance is not indicative of future results.<\/p>\n\n\n\n<p>We know that markets have gone up substantially over the past few years, so it should not be a surprise that we have seen more up days than down days over most of the past 15 years.&nbsp; We also see that the percentages of 1% moves, either up or down, have generally matched those of the overall level of up and down days.&nbsp; This is true over the whole period and the 4 \u00bd years since the post-Covid market recovery began in earnest.<\/p>\n\n\n\n<p>But there are indeed some differences.&nbsp; For most of the longer periods, we saw that 2% and 3% moves were more likely to be to the downside. That fits with the adage.&nbsp; But that seems to have changed in recent years.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>During 2022, which was the most recent bear market, we saw a greater likelihood for +1% and 2% moves to be upward than we saw for up days overall.&nbsp; That speaks to the increased volatility that occurs during down markets, along with the propensity of bear market rallies to show outsized gains.&nbsp; That said, the 3% moves were definitely to the downside.&nbsp;<\/li>\n\n\n\n<li>And since 2023, when so-called 0DTE options took root among traders, things seem to have changed somewhat.&nbsp; 1% up days were more likely than up days overall, there was an even split between infrequent 2% moves, and no moves of more than 3%.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>It is tough to draw conclusions from a relatively short timeframe \u2013 even if it has over 500 readings \u2013 but it is entirely possible that this is reflective of the potent combination of positive momentum, FOMO, and the ability to monetize them using short-dated options.&nbsp; Modest rallies can more easily become big rallies, and the deeply ingrained \u201cbuy the dip\u201d mentality has allowed us to avoid relatively major drops in the past two years.<\/p>\n\n\n\n<p>We can\u2019t prove that the adage is passe, but it may have much less value in the current market environment.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There\u2019s an adage that sticks in my head, but it\u2019s hard to pin down.  The saying is some variation of \u201cstocks take the stairs to the roof and the elevator to the basement.\u201d  The implication is that stocks tend to grind higher when they rally but fall quickly when sentiment turns.  Most market adages are rooted in fact, but when we thought about the market\u2019s recent moves, we decided to question this one.<\/p>\n","protected":false},"author":4,"featured_media":195584,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[145,147,8,12,153,148,7],"tags":[],"contributors-categories":[149],"class_list":{"0":"post-201294","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ibkr-market-insights","8":"category-north-america","9":"category-region","10":"category-securities","11":"category-stocks","12":"category-text-articles","13":"category-traders-insight","14":"contributors-categories-interactive-brokers"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.8) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Do Stocks Take the Elevator Up or Down? | Traders&#039; Insight<\/title>\n<meta name=\"description\" content=\"There\u2019s an adage that sticks in my head, but it\u2019s hard to pin down. 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He has held numerous roles in the organization since joining Timber Hill, IBKR\u2019s predecessor, in 1995 as Equity Risk Manager and an options market maker. He developed and implemented automated trading strategies for stocks and options before moving into his current role. Steve has guest authored several columns in Barron\u2019s and made numerous live on Bloomberg TV and Radio, CNBC, Yahoo Finance, Fox Business, and several other media outlets in North America, Asia, Australia, and the Middle East in addition to being quoted frequently in print and electronic media. Prior to joining Interactive Brokers, Sosnick held senior trading roles at Morgan Stanley, Lehman Brothers, and Salomon Brothers, where he completed the firm\u2019s famed training program.","sameAs":["https:\/\/ibkr.com"],"url":"https:\/\/www.interactivebrokers.eu\/campus\/author\/steve-sosnick\/"}]}},"jetpack_featured_media_url":"https:\/\/www.interactivebrokers.eu\/campus\/wp-content\/uploads\/sites\/3\/2024\/06\/yield_curve_confused_featured-img.jpg","_links":{"self":[{"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/posts\/201294","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/comments?post=201294"}],"version-history":[{"count":0,"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/posts\/201294\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/media\/195584"}],"wp:attachment":[{"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/media?parent=201294"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/categories?post=201294"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/tags?post=201294"},{"taxonomy":"contributors-categories","embeddable":true,"href":"https:\/\/ibkrcampus.eu\/campus\/wp-json\/wp\/v2\/contributors-categories?post=201294"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}