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Are big up days a buy or a bear-trap?
Big up days feel like the all-clear. They are not. Most +5% days have occurred DURING bear markets — the so-called bear-market rallies. This chart shows what actually followed historically.
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
Of the 20 largest single-day gains in S&P 500 history, 16 occurred during bear markets or recessions. The +5% day is often a counter-trend move, not a trend reversal.
Forward 3-month returns after +5% days are actually below average because they tend to occur within ongoing drawdowns that have further to run.
When clients call excited after a big up day, this chart reframes: the best days happen during the worst periods. Stay the course either way.
Treat a huge up day as a drift check, not a green light — most of these occur inside ongoing bear markets, and chasing the bounce has historically meant buying into declines with further to run. If the pop has lifted a depressed holding back toward its target weight, consider completing a rebalance you had already planned rather than adding beyond it.