Stock Sell Off Could Be Shallow, History Shows

History shows that once the stock market has fallen by 5 percent during a broader rally, it typically continues to decline but usually does not make it to a double digit correction.

As of yesterday, the S&P 500 close of 1256 was 6.4 percent below its Feb. 18 high of 1343.

Birinyi analyst Cleve Rueckert says 5 percent declines in the S&P, since 1945, have on average turned into 8.3 percent declines over an average period of 41 days. These 5 percent pull backs have resulted in corrections of 10 percent or more 33 percent of the time, and hardly ever result in a bear market. Only 11 of 106 instances turned out to be bull market tops.

"If you look at some of the other crisis that occurred, they don't have a long lasting impact on the stock market," he said. Rueckert said an example of another period where there were two crisis combining to dent the stock market was last year when the BP oil spill hurt sentiment as the markets were reacting to Europe's sovereign debt crisis.

While the events in Japan are unpredictable, and Middle East turmoil continues, Rueckert expects the current sell off to result in a buying opportunity. Barring a worst case scenario in Japan that severely cripples its economy, stocks will probably resume their rise soon.

Nine of the 10 S&P sectors are oversold, and the most oversold is technology, he said. The sector that is not oversold is energy, which has gotten a lift from higher oil prices. Oversold conditions occur when a sector is at least one standard deviation below its 50-day moving average, he said.

"Usually, 90 percent of the time, it's a buying opportunity," he said.

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