USMarketView

March 13, 2008

All three indices moved higher, with the NASDAQ more than recovering yesterday’s loss.

The market has now established a +1 -1 +1 -3 pattern. Meaning today’s uptick, following Wednesday’s decline, Tuesday’s increase, and on Monday experiencing the third successive negative close. There have been about 15 of these configurations since January 2000, with the following median gains – DJIA .58 percent, NASDAQ .66 percent, and.53 percent for the S&P500.

Twice this year, the DJIA followed this pattern, and closed more than one percent higher on the following day. The NASDAQ had the same experience on February 25. Overall, since January 2000, the DJIA had 12, the NASDAQ had 11, and the S&P500 had 9 higher closes the next trading day.

DJIA .29 percent
NASDAQ .88 percent
S&P500 .51 percent

March 12, 2008

The steepest decline was the S&P500, losing -.90 percent, with the NASDAQ off -.53 percent, whereas the DJIA came off the least hurt, falling just -.38 percent.

Relating today’s closes to yesterday –when all three indices gained nearly four percent- and the record of changes of that magnitude, we focus this analysis on the features of these latest developments; do they share, or diverge from, the past?

Ten of the days, following the 16 trading days that scored advances near four percent in all three indices, occurred in the 2000-2003 decline. Moreover, the median changes on the following day were all negative. The other six took place in the early stage of the following recovery; their median changes were all positive.

Four of the following days during the expansion phase scored advances, whereas six of the ten days in the decline ended negative.

As for the extent of the losses during the long market decline, the DJIA suffered least, maintaining 64 percent of its peak value. The NASDAQ lost the most, keeping just 22 percent of its highest close; the S&P500’s bottom reached 51 percent of its top.

These declines are far larger than the drop off from last fall’s tops. At Monday’s closing prices, on March 10, the NASDAQ was at 77 percent of last October price, the S&P500 at 81 percent and the DJIA at 83 percent.

DJIA - .38 percent
NASDAQ -.53 percent
S&P500 -.90 percent

March 11, 2008

The NASDAQ, gaining almost 4 percent led today’s impressive market advance. The two other indices were close behind, as the S&P500 rose 3.71 percent and the DJIA wound up 3.55 percent higher for the day.

Such a welcome turnaround, after three straight declines for all indices, occurred only 16 times before today, but not with these strong results; the median rise of those earlier increases was about 1.15 percent.

Moreover, daily increases above three percent are rare, with some 17 closes of that size since January 2000. Ten of those shared the major market decline of 2000 to 2002; while the other seven occurred during the early stages of the last upswing, between the middle of 2002 and early 2003. There have not been any greater than three percent increases since March 2003.

It is significant, that in the past, these triple index larger than three percent gains, occurred when the market was falling, or reversing a long decline.

Another feature of today’s gains, is that these occurred after all three indices declined for three successive sessions. And today the Fed took a meaningful step to increase the financial markets’ liquidity.

This is similar to the actions of January 22: then the Fed cut its funds rate by 75 basis points, as the market was slipping for the fifth day in a row.

DJIA 3.55 percent
NASDAQ 3.98 percent
S&P500 3.71 percent

March 10, 2008

Today’s declines are the third in a row for all three indices, with losses ranging from -1.29 percent for the DJIA to -1.95 percent for the NASDAQ. While each of the averages experienced three successive negative closes separately about 115 times since January 2000, Monday is only 38^th occurrence for all three indices to fall together three days in a row.

Moreover, five of these 38 happened last year, with the most recent of these on January 17. Indeed, on the next day’s close, on January 18, all three indices fell for the fourth day in a row. And that was when the Fed cut its Fed Fund rate 75 basis points.

In terms of the next day, in the past the DJIA, NASDAQ and S&P500 suffered a fourth straight loss 13 times, while recovering and closing higher, after three successive losses, some 16 times. Nevertheless, the upside potential becomes greater, when separating the data in terms of before 2005 and later: in that time frame, there were six upticks, compared to 4 losses, on the day after all the three indices posted three successive losses.

DJIA - 1.29 percent
NASDAQ - 1.95 percent
S&P500 - 1,54 percent

March 7, 2008

The NASDQ continues to suffer Friday to Friday losses, and in posting its third straight losing week today, it has accumulated eight negative weeks over the ten weeks of this year. Its current drop of 2.60 percent is the fourth deepest weekly decline in 2008.

Indeed, the DJIA and the NASDAQ also turned in their fourth sharpest weekly close this year, although they have advanced in six of the last ten weeks.

As noted in an earlier, recent discussion, the rate and frequency pattern of recent daily changes bear more similarity to the falling market between April 2000 and October 2002, than they do to the bull market that ended last fall. The same relationship also is apparent in the pattern of weekly changes. This can be seen in the figure below for the NASDAQ, and holds also for the DJIA and S&P500. (These two diagrams are available for the asking.)

These factors should not escape our attention when contemplating future index changes.

DJIA - 1.22 percent
NASDAQ - .36 percent
S&P500 - .85 percent

March 6, 2008

After three days of minor movements, the indices took the biggest hit since last Friday, with the NASDAQ and the S&P500 losses deeper than two percent. The DJIA was off 1.75 percent.

The S&P500 had just three losses as large in the roughly 100 trading days since last October, whereas the NASDAQ had 7, and the DJIA experienced 8 losses like today’s.

As for the day after such deep declines, since the market’s last peak, the DJIA went up seven times, declining just once. The NASDAQ turned in almost the same performance, rising the next day on six of the seven times its loss exceeded 2.3 percent.

The S&P500 spring back is not as frequent, with just one positive day following its three steep declines since last October.

DJIA -1.75 percent
NASDAQ - 2.30 percent
S&P500 - 2.21 percent

March 5, 2008

All three indices moved up today; their closing, within just about one half percent of yesterday, repeats the experience of Monday and Tuesday.

There is a definite relationship between the size of daily changes when the market is rising and when the market is falling. This was experienced in the last contraction and expansion.

When prices were decreasing, from March 2000 to October 2002, about 43 percent of the S&P500 and the DJIA daily changes were in excess of plus or minus one percent. By contrast, during the succeeding expansion, from October 2000 to the last peak on October 2007, only 20 percent of the daily changes were in that range of plus to minus one.

Since then, to today, 45 percent of the S&P500 daily changes were in the plus one to minus one percent limit, as were 39 percent of the DJIA closes – clearly sharing the characteristics of the earlier, falling prices period.

The same conclusion holds for the NASDAQ: 53 percent of its recent closes were in the plus one to minus one percent range. This number is closer to the 70 percent experience of the 2000 downturn than the recent expansion, in which only 40 percent of the daily changes were within those limits.

DJIA .34 percent
NASDAQ .55 percent
S&P500 .53 percent

March 4, 2008

While there were large intra day movements, the indices finished almost unchanged for the second day in a row. The S&P500 gave up -.35 percent and the DJIA fell for the fourth successive day, losing another -.37 percent. Yet the NASDAQ closed higher, by a meager -.07 percent.

The DJIA has experienced such four straight losses 49 times since January 2000, with a median daily decline of -.50 percent. But last week, previous to these four negative days, the index scored four straight advances! Such a pattern –four successive down days after four successive up days – was last seen on January 2 of this year. And there are just three prior occasions in this century.

In the past, the DJIA declined a fifth day 21 times, with a median loss of - 1.06 percent; while there are 28 occasions when the next day turned up, improving by a median of .44 percent

In closing, note that on Monday the S&P500 closed higher

ile the other two indices declined. Today it was the NASDAQ’s turn to move higher while the DJIA and the S&P500 declined. Such a NASDAQ contrary move happened last on February 8; and 122 other times, with a median uptick of .28 percent, since January 2000.

DJIA -.37 percent
NASDAQ .07 percent
S&P500 -.35 percent

March 3, 2008

In a rather flat finish, the S&P500 inched up .06 percent while the DJIA slipped -.06 percent. The NASDAQ also fell, losing -.57 percent.

As noted before, daily changes in the individual indices are usually in the same direction. While non-uniform patterns, as today, do occur, they are rare. This is just the 17^th time, since January 2000, where the S&P500 increased when the other two declined. The last time was only a few weeks ago, on Friday, February 15.

DJIA -.06 percent
NASDAQ -.57 percent
S&P500 .06 percent

Posted March 4, 10:15 AM