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3/2/07
Observations:
● On Tuesday, February 27, 2007, the Dow fell 416 points (a 3.29% decline).
● One month performance has been positive after single day declines of 3% or more.
● One year performance has been strong after single day declines of 3% or more.
Summary:  
The Dow closed 416 points down on February, 27th, for a 3.29% decline. Such a decline is gut wrenching no doubt.
Is it an omen of deeper declines to come or a buying opportunity? A one day decline in excess of 3% has historically
been followed by strong market performance. From 1897 - 1949, there were 275 such dog days in the Dow. After
1949, there have been 48 one day declines of that magnitude.

During 1950-2006, the average return, for the thirty day period subsequent to a one day Dow decline in excess of 3%
has been .4%.

During 1950-2006, the average return, for the one year period subsequent to a one day Dow decline in
excess of 3% has been 12.3%.
The average annual Dow return for 1950-2006 was 7.4%. So the Dow actually has
performed 4.9 % better after a one day loss exceeding 3% (12.3%-7.4%=4.9%). The same tendency existed before
1950 as you can see in the table above.

Abundant arguments for a correction do exist as previous issues of Investment Tips have discussed. Tuesdays sell
off however, is not one of them.
1897-1949
1950-2006
416 Point Drop: Omen of Doom or Buying Opportunity?
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5.6%
12.3%
DJIA Returns (without dividends)
Average
Annual
Return
Average Return
(Year After 3%
One Day Drop)
Average Return
(Month After 3%
One Day Drop)
.6%
.4%
3.0%
7.4%