"Attached a jewel....courtesy of Comstock taken out of Seeking Alpha:

"Ned Davis Research (NDR) is well known by all of our viewers as we frequently use their research and charts in commentaries. They did a study that took place one year after the S&P 500 (S&P) declined by 14% in just one quarter (as it just did). They found that since the 1920s the S&P lost 14% in one quarter 21 times, and the following year the S&P rose 13% on average. And if you just included the 14% quarterly losses since WWII, the S&P would be even greater or + 23%. The conclusion of this analysis would have to make you more positive on the stock market.

"Another statistical observation arrived at by an equally impressive stock market visionary, Ed Hyman of Institutional Strategy and Investment (ISI), was not as positive. He stated this past week that there were seven times since WWII that the S&P 500 dropped 20% or more, and a recession followed in 5 of the 7 times. The exceptions were 1987 and 1998. Since the S&P 500 just dropped almost 20% from 4/29/11 to 10/3/11, he concluded that there is about a 70% chance that the economy would be headed for a recession (5/7= 71%)."

David Fuller's view Thank you for sharing this item in the spirit of Empowerment Through Knowledge.

This latest study by Ned Davis Research is interesting, although perhaps not all that surprising. A 14% decline by the S&P 500 represents a significant correction, and for stock market indices in an environment of abundant liquidity, what goes down usually goes back up, a few notable zombie examples excepted.

Of course there are some important additional factors to consider:

Recessions produce bigger stock market declines, not surprisingly, which tallies with Ed Hyman's comments quoted above.

Looking to next year, although global GDP growth remains a concern, extremely low interest rates in the US will remain a tailwind for US equities. 2012 is also an election year and these have been bullish more often than not, although 2008 was certainly a dramatic exception.

A glance at these daily charts for the S&P 500 and the Nasdaq 100 Indices reveals a degree of schizoid action which is unusual, even for emotional markets. In a rhetorical question: do you think this is due mainly to the Greek Chorus, US economic policy or high frequency trading?

Note: Eoin produced Fullermoney's latest comment on HFT abuses last Friday, in response to an informative article kindly forwarded by a subscriber.