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Fear the Sevens?

In years that end in the number seven, such as 2017, markets have experienced a correction of some level. In fact, the average decline, going back for 130 years, has been about 13%. But 2017 looks to be the year to end this streak.

Since 1887, even before the DOW, markets have suffered downturns between August and November. We are in mid October so there is still time and if it were to occur we think that it would be drastic. The most significant drop was in 1987, 30 years ago this Thursday, where the DOW dropped 22.6%. It is on record as the worst single-day loss ever for the markets. The worst drop an entire year containing the dreaded number 7 was in 1937 during the Great Depression when the DOW lost about 40% of its value.

This chart provides a graphic if the losses in years ending in seven.

We wonder of Las Vegas is taking bets on this occurrence and the fact that the pattern of sevens appears to be at an end. The Dow has not experienced a loss of more than 1%, in any one day, for 42 days.

Are we setting up for a big and fast correction? It does not appear so as earnings are good. Even IBM, which has had numerous bad quarters, is up this morning on its earnings release yesterday. Can the markets just keep going up? No, but when it ends and what the decline will be us unknown. What we do know is that we are in totally new territory. Keep your eyes open.

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