Key points:

• RSP recovered from an 8% drawdown back to breakeven in roughly 42 trading days, one of the fastest recoveries from that depth
• The tightened signal, -8% to 0% in 42 days, has only 6 prior occurrences, and RSP was higher six months later every single time
• Loosening the filter to -5% drawdown recoveries still shows positive forward returns, with tech and discretionary leading
• Energy is the lone sector that has struggled after these recoveries, with a negative median return a year later

A rare roundtrip

The equal-weight S&P 500 did something this month that it has almost never done before. It fell 8% from a three-year high in early April, then clawed all the way back to breakeven by late May. Roughly 42 trading days from trough to recovery. A roundtrip from a real scare.

Not many pullbacks of this depth in the average stock resolve this fast. That is partly the point.

The tightest sample

Require the recovery to go from -8% to 0% within 42 trading days and the sample shrinks to six prior signals. Six. That is minuscule, and three of them cluster in 2011-2012, so we are not working with independent draws from separate regimes. Fair warning.<