Short-Term Waterfall Declines in the Stock Market:

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I went back to 1996 (N = 2891 trading days) and found only four occasions in which we had a prior overnight session down by 1% or more followed by a day session down by 1% or more and a current overnight session down by 1% or more. Interestingly, these short-term waterfall declines tended to occur at key junctures near intermediate lows in bear markets: 9/21/01 (after the 9/11 incident); 10/28/97; 4/17/2000; and 10/1/98. Three of the four occasions rose very sharply during the subsequent day session (over 3%) after dipping very little after the open. The one occasion that was down during the day session (by a little over 1%), recovered to a gain the following day.

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