USMarketView

July 31, 2008

At today’s close, these indices are just a smidgen higher than last Friday. So the result of this week’s two strong upswings and two days of substantial decline have netted out to some ten points for each index.

Moreover, except for yesterday, when prices rose for the second day in a row, the other five closes posted alternate gains and losses.

So, since Thursday a week ago, the market has been on a rocking horse run, putting together a chain of plus days and negative days. There are just three such patterns since 1950, and all occurred since July 2000.

What was happening to prices on these three days? The first one, on June 5, 2000, coincided with the start of the huge price drop of 2000-2003.

The second, on March 3, 2003, happened at the bottom of that cycle.

The market was rising, but took a pause, when the third strike occurred, on January 13, 2005.

As for the day following this chain, the DJIA posted losses on each of the succeeding days. The NASDAQ and the S&P500 managed to rise on one of those three days, but fell on the other two.

DJIA -1.78. percent

NASDAQ … . - .18. percent

S&P500 -1.31 percent

July 30, 2008

Sizeable gains today did not match yesterday’s performance, but, except for the NASDAQ index, they reached more than 1.6 percent.

The DJIA scored only 21 other two days in a row closes this large since 1952. As for the current year, only on July16 and 17, some nine days ago, did the DJIA gain more than 2.3 percent on one day and more than 1.6 percent the following day.

Moreover, all of these twin gains followed immediately after the index fell a day earlier.

The following diagram charts the DJIA from January 2000 to last July 25. The vertical lines are plotted on the six days with these twin gains. It is clear that the first three took place just before the DJIA index started a significant decline. The fourth and fifth occasions, in August and October 2000, however, seem to precede, if anything, a substantial rise in prices.

Only time will tell if the July 17 and today’s closes connote a lower turning point or continued decline.

DJIA 1.63 percent

NASDAQ … . .44. percent

S&P500 1.67 percent

July 29, 2008

The market headed up from the start, as it reversed itself again, and in a complete opposite of yesterday, the indices closed up by more than 2.3 percent.

With prices moving up and down like a rocking horse, this pattern has now repeated for the 11^th time this year. On only one occasion did prices rise by more than two percent – but increases greater than one percent were registered eight times.

In terms of associating this model with trends of price changes, in the past eight years, rising markets have more of these down one day and up the nest day than falling prices. Consider the 21 occurrences in 2003, when the S&P500 gained more than 25 percent; compared to 2000, when prices fell ten percent with just four of these rocking horse days.

As for turning points, three rocking horse days, since 2000, scored gains exceeding two percent for all three indices. As illustrated below, two of these came at a local peak just before prices hit bottom and the market rebounded into a new, long term rise. But does the 2007 event at the peak, combined with today, signal a similar future, or will prices continue to fall?

DJIA 2.39 percent

NASDAQ … 2.45 percent

S&P500 2.31 percent

July 28, 2008

The market headed south from the start, and by the end of the day, the DJIA lost -2.11 percent, the NASDAQ fell -2.00 percent while the S&P500 declined -1.84 percent.

As noted earlier, the recent pattern of closes often alternates between losses and gains. Today’s pasting follows Friday’s up tick, which came after Thursday’s decline . . .

Losses as deep as today’s, after an increase the day before, are relatively rare for the DJIA and the S&P500. The former has only four such days since January 2000; all of these came either between 2000 and 2003, or in 2007 and 2008.

The S&P500 has eight such days, all of which are in the downswing of 2000-2003.

But the NASDAQ record is different: this index has 104 days with losses in the -2.0 to -2.2 percent. Half of these occurred during the dot com decline, between 2000 and 2002.

The history, of changes on the following day, is not significant in either direction; while the S&P500 closed higher twice as often as it declined, the other two indices have an equal number of next day losses and gains.

DJIA -2.11 percent

NASDAQ … . -2.00. percent

S&P500 -.1.84 percent

July 25, 2008

While the NASDAQ scored another advance this week, its second in a row, the other two indices lost ground over the previous Friday. It’s quite unusual to see this inconsistency: indeed, there are only twelve such weeks, since January2000, with this record.

In considering this disparity, it is significant to note that ten of these weeks occurred during 2000 and 2001, when the market turned down, in the last correction of values. Moreover, there are two periods when these opposing weekly results appeared close together. In 2000, between January and March, there were four such weeks; and in 2001, three came between March and June. And, of course, that’s when prices declined.

But it seems too early, to conclude from this pattern, that a further downturn is imminent, for this Friday’s pattern was last seen in March 2006.

A similar comment can be made about this Friday’s close. The NASDAQ gained 1.33 percent, whereas the S&P500 moved up .42 percent, and the DJIA trailed with a .19 percent increase. That is, the NASDAQ move is about three times as great as the S&P500; and further, that the S&P500 increase is about twice the size of the DJIA.

There have been only 23 such days, since January 2000, sharing this 3-2-1 relationship. Relating these to the direction of the market, twelve occurred during the market adjustment, between 2000 and 2001. Moreover, as with the weekly results described above, these came quite close together. By contrast, nine happened when the market was rising; these incidents were usually more than one hundred days apart.

Since the last occurrence was some 207 trading days ago, on December 26, 2007, an inference about future market direction is not appropriate.

DJIA .19 percent

NASDAQ… 1.33 percent

S&P500 .42 percent

July 24, 2008

Contrary to yesterday’s upticks, and positive inferences, today dealt sizable declines to the market. The DJIA and the S&P500 lost more than two percent, whereas the NASDAQ dropped -1.97 percent.

The record shows only three dates with such losses after two successive gains; those occurred between May 2002 and January 2003. They accompanied the market’s substantial drop … and foreshadowed its recovery.

But the interpretation of what the future may bring can be bidirectional. If today is akin to the losses of May and July 2002, then, as at that stage, prices still have to fall some more.

However, if they reflect the January 2003 event, than the market is near its lower turning point and valuations will appreciate soon.

DJIA -2.44 percent

NASDAQ … -1.97 percent

S&P500 -2.31 percent

July 23, 2008

All three indices closed higher at mid-week, with the NASDAQ gaining .95 percent, the S&P500 .41 percent and the DJIA .26 percent.

Obviously, these are not advances to write home about, but their direction could imply that stock prices are on the way to further improvement.

Breaking down the current year into three segments, with the first ending as the decline hit bottom in March; the second mirroring the aborted recovery that ended in May; and the last segment stretching from that point to the current date, we consider the variations in median change of the three indices.

The first and last periods, obviously the segments dominated by falling prices, feature a negative median daily change for all three indices. The middle segment, however, that covers rising prices, has a positive daily median change.

Thus the price increases scored yesterday are, at least, at the proper level that distinguishes a rising market.

DJIA .26 percent

NASDAQ … .95 percent

S&P500 .41 percent

July 21, 2008

While the averages fell on Monday, they hardly budged from their Friday closes, as the S&P500 dipped -.05 percent, the NASDAQ -.14 percent whereas the DJIA, the day’s biggest loser, was off just -.25 percent.

Whilst no other such day can be found, going back to 1950, there have been 13 other days when these indices fell but their losses were limited within yesterday’s range. And in the present decade, these occasions were no more frequent than four times.

The latest of these, before yesterday, occurred on August 8 of last year. The current sliding market, of course, gathered speed shortly thereafter. One other incident, with unequivocal negative consequences, goes back to November 2000.

But the other two closes featuring this profile took place when the market paused briefly before continuing to move to higher ground.

As for the day following this pattern, the S&P500 and the DJIA dropped eleven times and moved higher only twice; although the NASDAQ closed up five times while limiting the following day to the negative column on only eight occasions.

DJIA -.25 percent

NASDAQ … -.14 percent

S&P500 -.05 percent

July 18, 2008

Based on only the strong performance on Wednesday and Thursday of this week, the NASDAQ and the S&P500 finally posted their first positive week since falling for six weeks in a row. The DJIA also gained this week, after losing ground in the previous seven weeks.

Friday’s NASDAQ performance resulted in a -1.28 percent loss; yet this index is still above its trough in the spring of this year. The DJIA and the S&P500, however, have not recovered to the lows posted then.

As for today’s trading, both the DJIA and the S&P500 moved slightly higher; this was their third successive positive day. The NASDAQ, on the other hand, declined substantially, losing some -1.28 percent, and reversing the upticks in the previous three days.

This was the third time such a combination of patterns -three positive closes for the DJIA and the S&P500, and a decline for the NASDAQ- occurred this year. It is only the 11^th time in this century and the 46^th occurrence since 1950.

DJIA .44 percent

NASDAQ… -1.28 percent

S&P500 .03 percent

July 17, 2008

The NASDAQ scored another gain today, its third straight close in the positive column. Since January 2000, this index had 150 such closes; by contrast, three negative closes in a row occurred 128 times.

No record, since 2000, justifies the association of three straight positive or three straight negative days with either growth or decline in the NASDAQ. For example, in 2000, when the market fell, there were 15 occurrences of positive closes and 19 negative closes, three days in a row. In that year, stocks lost ten percent. But in the following year, when prices fell by thirteen percent, there were 22 runs of three positive days in a row, compared to only 17 runs of three straight negative days.

The DJIA and the S&P500 increased for the second day in a row. The three previous days saw these indices decline. Here again, as with the NASDAQ, there is no clear pattern associating such runs with either a rising or a falling market.

Indeed, on the day following this pattern of two positive closes/following three negative closes, the S&P500 experienced an equal number -21- of increases and decreases; whereas the DJIA scored 13 gains but suffered 15 losing days.

DJIA 1.19 percent

NASDAQ…… .78 percent

S&P500 .55 percent