During pre-election years, like 2015, each administration tries hard to impress voters, either via stimuli or copious amounts of lipstick to make even the ugliest pig (aka, the economy) look pretty. Historically, pre-election years sport the best performance numbers of the four-year presidential election year cycle.

On average (based on data going back to 1933), the Dow Jones Industrial Average gains 10.40% during pre-election years.

Not this year.

In fact, the last time the Dow Jones Industrial Average recorded a year-end loss in a pre-election year was in 1939.

Unless the Dow climbs back above 17,824, this will be the first pre-election year loss since 1939. What would a 2015 loss mean, and what are the odds of a year-end rally to avoid such a loss?

What would a 2015 loss mean?

As the second chart shows, the track record for election years isn't bad. Nevertheless, weakness during the normally strong pre-election year may be an indication that this bull market has overstayed its welcome.

According to the Wall Street Journal, at 73 months, the current expansion is longer than 29 of 33 expansions the U.S. economy experienced since 1854. Based on the election-year cycle, 2017 and 2018 have the potential to be dicey. Based on our major market top indicator, 2016 has the potential to be ugly regardless.

Year-end rally or breakdown?

December performance has been unusually dismal thus far. There have been only very few instances where the S&P 500 was down more than 3% in the middle of December and suffered two back-to-back losses (last Thursday/Friday) of more than 1.5%.

This report shows how the S&P 500 did when this happened in the past.