April 16, 2008
Stocks soared today, and the NASDAQ, rising 2.8 percent, scored its third greatest advance of the year. The DJIA and the S&P also did well, increasing 2.08 percent and 2.27 percent, respectively, marking their fourth best day of 2007.
Looking at the past, to evaluate just how good this performance is, we see that the S&P500 had just 34 trading days, since January 2000, with gains in the 2.0 to 2.5 percent range; the DJIA had a few less: 32 all told. But the NASDAQ did far better, closing in the 2.75 to 3.00 percent range a total of 88 times in this century.
Such good news could turn out to be a signal of further stress ahead, when the incident of these advances is factored into the evaluation.
Look at the NASDAQ: 77 of its 88 sizable gains occurred during 2000 and 2002. Thats when the market imploded, with the NASDAQ plunging from its high of 5048 to 1114 on October 9, 2002.
Similar, if not identical negative spirals hit the DJIA with 21 of its 32 plus two percent gains in that same period of disastrous losses. Of the S&P500s 34 closes between 2 and 2.5 percent, 20 took place as this index lost almost half its 1527 high, before hitting a low of 776 in the third quarter of 2002.
So we ask the fundamental question today: Does this performance portend good or bad times ahead?
DJIA 2.08 percent
NASDAQ 2.80 percent
S&P500 2.27 percent