USMarketView

March 31, 2008

The NASDAQ gained .79 percent, as Monday became the first day in the last three for an uptick; the S&P500, also up for the first time since last Tuesday, rose .57 percent.

While the DJIA increased by a mere .38 percent, in doing so it reversed four successive declines.

This pattern of closes –a positive day after four declines—has played 29 other times since the beginning of 2000. The median gain is .44 percent, not much different from the DJIA’s close today.

The pattern for the other two indices is a positive close after three declines. The NASDAQ experienced this 61 times, with a median recovery of 1.27 percent, substantially greater than today.

With the median of .62 percent for the S&P500, for 72 identical occurrences, the market today failed to reach the median gains associated with this closing pattern in this century.

Correction:

The March 28 report was ahead of itself, by calculating the first quarter’s performance as of Friday’s close. Instead, today, March 31 marks the end of the first quarter. While the analysis and comparisons in that issue remain unchanged, the losses of the first quarter are - 7.55 percent (instead of the published -7.90 percent) for the DJIA, -14.07 percent instead of -14.75 percent for the NASDAQ, and -9.92 percent, rather than -10.43 percent for the S&P500.

DJIA .38 percent
NASDAQ .79 percent
S&P500 .57 percent

March 28, 2008

While the NASDAQ stayed positive today, increasing by just .14 percent, the DJIA and the S&P500 fell by -1.17 percent and -1.07 percent, respectively.

It was negative week number eight for the NADAQ and the S&P500, in the 13 weeks of this year, and the seventh for the DJIA.

Yet results for the quarter that ended today –the first quarter– failed even to match this disappointing outcome. The NASDAQ lost -14.75 percent since the end of December, its second worst performance since 2001. The S&P500, off by -10.43 percent, also experienced a deeper decline only in the first quarter of 2001. These poor numbers enabled the DJIA, losing just -7.90 percent, to claim the best record of these indices.

Ordinarily, the first quarter of the year, is more often positive. Indeed, the NASDAQ failed to advance just 13 times since its creation 37 years ago. The history of the other two indices is not as favorable, both, nvertheless, scoring gains in 60 percent of the first quarters since 1950.

DJIA -.70 percent
NASDAQ -.86 percent
S&P500 -.80 percent

March 27, 2008

A decline steeper than yesterday was the result for all three indices on Thursday. The NASDAQ suffered the deepest cut, marked down some -1.87 percent. This was its second successive down day, after moving ahead for three straight sessions, starting exactly one week ago.

The NASDAQ replicated this pattern 39 earlier times, since January 2000. But its median hit of -.90 percent is only half as deep as today’s change. Moreover, in just 11 trading days, out of the 39, did it decline further.

The S&P500’s history is similar: a median drop of -.66 percent, with five closes sharper than today’s - 1.15 percent.

The DJIA lost -.97 percent, posting its third loss in as many sessions, having just two up days over the five trading days. Its median loss is -.63 percent, over the 30 trading days with this pattern, with 11 days experiencing losses sharper than today’s.

DJIA -.97 percent
NASDAQ -1.87 percent
S&P500 -1.15 percent

March 26, 2008

While losing less than one percent, all three indices declined on Wednesday. It was the second loss in a row for the DJIA, whereas both the NASDAQ and the S&P500 fell for the first time after three straight positive closes.

Reviewing these patterns, the NASDAQ had a median loss of -.74 percent in the 81 trading days since January 2000 on the first down day after three successive gains. Today’s decline was -.77 percent.

The median S&P500 loss was -.42 percent, less than half of today’s -.88 percent. As for the following day, these were down 25 times, while they moved higher on 39 trading days.

The NASDAQ history reveals an almost equal number of increases –on 42 days—as decreases, on 39 days.

DJIA -.88 percent
NASDAQ -.71 percent
S&P500 -.88 percent

March 24, 2008

The averages made tidy advances today, with the NASDAQ gaining 3.04 percent and the other two indices rising 1.5 percent.

The recent market increases look encouraging: two strong gains, following a major decrease – the indices lost over two percent; and this occurring after the market’s robust reaction to the fed funds cut of last Monday.

But a word of caution is in order, for the last time such large daily swings took place was in 2002 –when the market was approaching a major decline.

Just focus on the S&P500. Since 1950 this index had just six separate runs, exactly like today, Thursday and Wednesday of last week. That is, over a three trading day period, a 1.5 percent gain, following a 2.3 percent rise, that came the day after a loss exceeding -2.4 percent.

The specific dates are May 1962, October 1987, September 1998, April 2000 and August and October 2002. These dates share a common feature. In all of these three day incidents, the market dropped soon thereafter.

This record implies prudence; it could signal that prices will decline some more, before the recovery takes place.

DJIA 1.52 percent
NASDAQ 3.04 percent
S&P500 1.53 percent

March 20, 2008

While just a four day week, it was one of the best this year. The DJIA climbed 3.43 percent and the S&P500 gained 3.21 percent; the NASDAQ trailed these increases, moving higher by just 2.06 percent since last Friday.

At the close of today’s market, the indices had moved up by more than two percent, thus recovering a good part of their losses yesterday.

Considering today’s performance in light of the upcoming Easter weekend, note that since the turn of the century, the market has moved higher on the Thursday before the Friday recess more often than it declined. The best record is that of the NASDAQ, with nine increases and only two declines. The laggard DJIA nevertheless has a 7:4 ratio of higher to lower closes.

But in the past, on the Monday following the holiday, the market declined more often than it increased. The best performer being the DJIA, with just six positive to five negative closes. The other two indices registered almost twice as many decreases as increases: the ratio for the NASDAQ and the S&P500 is four positive to seven negative closes.

DJIA 2.16 percent
NASDAQ 2.18 percent
S&P500 2.38 percent

March 19, 2008

While unwelcome, today’s reversal is not without precedent on two counts. Given that yesterday’s advances were near record proportions, a correction followed, possibly because prices overshot expectations.

There are just six trading days, since January2000, on which the S&P500 surpassed its 4.2 percent gain. Six divided by 2,062 –the trading days in this century- comes to merely a third of one percent.

And while the DJIA advance of 3.5 percent is smaller, and occurred some 12 times since 2000, this represents less than one percent of all closes.

It is true that the NASDAQ experienced 37 closing in excess of 4.2 percent, but this is no more frequent than twice every 100 days.

Yesterday’s cut in the fed funds rate is the other factor bearing on the decline. Often the day after brings a reversal, as last November, when the indices lost about 2.5 percent.

As for the second day after such cuts, the chances are about the same for an advance as for a decline: since 2000, the averages gained eight times but declined nine.

DJIA -2.36 percent
NASDAQ -2.57 percent
S&P500 -2.43 percent

Prices increased sharply even before the Fed announced its 75 basis points cut, and then, after some hesitation, they moved even higher. The S&P500 closed up 4.2 percent, thus scoring the highest gain on the announcement day since its 5.0 percent rise in January 2001.

The NASDASQ also moved up 4.2 percent; this was its third largest response to a fed funds fall. While the DJIA rose just 3.5 percent today, nevertheless this also was its third largest reaction to this Federal Reserve policy move.

Stocks do not rise automatically to reductions in the fed funds rate; indeed, since 2000, both the DJIA and the S&P500 have an equal number of up and down changes, whereas the NASDAQ has ten increases to its eight declines.

DJIA 3.51 percent
NASDAQ 4.19 percent
S&P500 4.24 percent

March 17, 2008

The DJIA eked out a positive .18 percent gain, whereas the NASDAQ fell -1.61 percent and the S&P500 lost -.90 percent.

Comparing this result to the 76 times, since January 2000, that a pattern of DJIA up with the other two indices down, with the current changes, reveals that they are significantly below the previous medians.

The median decline of the NASDAQ is -1.03 percent; today’s
-1.61 percent loss is in about the 35^th percentile of the historical                             data.

The S&P500 record is worse: its median, only -.19 percent, indicates that Monday’s retreat of -.90 percent is almost four and a half times as large. Indeed there are just 18 days experiencing losses this deep.

The main overhang on today’s market was the liquidity problems of a major institution with a strong balance sheet; and the expectation that Tuesday will bring a substantial fall in the Fed’s fund rate.

DJIA .18 percent
NASDAQ - 1.61 percent
S&P500 -.90 percent

March 14, 2008

Today’s close, the third down day of the week, was also its deepest. The S&P500 finished below last Friday, while the NASDAQ ended on the same level. The DJIA did move ahead, by .48 percent for the week.

In terms of Friday-to-Friday changes, 2008 so far has the most negative record of the decade. All three indices fell in six of the first ten weeks of the year, a record unequaled since 2003.

The Friday-to-Friday performance in the first eleven weeks of the year is basically negative: in six of the weeks, all three indices fell. The NASDAQ declined in eight weeks, the S&P500 in seven weeks, and the DJIA on 6 Fridays.

DJIA - 1.60 percent
NASDAQ - 2.26 percent
S&P500 - 2.08 percent