USMarketView

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

This entry was posted on Monday, March 24th, 2008 at 12 042008000000Mon, 24 Mar 2008 16:05:21 +0000 and is filed under Market Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.