We have previously described the change in market structure post the mid-year USA ratings downgrade as the impossible was suddenly made possible. Nowhere is this more evident than in the huge difference in cumulative distance traveled by the S&P 500. Considering close-to-close changes from the beginning of the year, we see that the average shift of 6 points per day (pre-USA-downgrade) has more than doubled post the downgrade to 12.6 points per day. The S&P 500 has traveled, close-to-close only, an incredible 3193 points on the year while from the 12/31/10 close, the index itself has moved a mere 3.64 points. At this rate, should the US be downgraded another notch, we will see 25 point per day close-to-close changes and the broken market that we described post-downgrade will become more of a farce than it already is.
Of course, the distance traveled will tend to infinity should we choose smaller and smaller time intervals (think about measuring the distance around the coast of Britain with a smaller and smaller ruler) but we remind readers of Benoit Mandelbrot's work on fractals and the use of the Hurst exponent - the S&P's behavior on a short-term basis is becoming more and more anti-persistent (less persistent than simple randomness or more chaotic). If the market had been up in the previous period, it is more likely (than random) that it will be down in the next period and vice versa.
One way of considering the change is simply that market-time is speeding up - which makes sense when one considers the speed of response of the average algo-/correlation-driven robot running the show now on the back of the sporadic intervention of government's all too visible hand. Anecdotally, we see moves that used to be week/month now occur in hours/days.
So in summary - the S&P 500 has traveled 877 times further than its actual gain/loss on the year!