Archive for September, 2008

Has Recovery Started?

Tuesday, September 16th, 2008

September 16, 2008

The day after the Lehman news, and even while the AIG situation remains unresolved, all three indices moved up more than a point. That’s quite different from the early morning start, when prices fell. It was not until 2 PM, after the Fed announced its refusal to lower rates, that prices started to move higher. Finally, at the close, the S&P500 gained 1.75 percent, the NASDAQ 1.36 percent and the DJIA 1.30 percent.


This is the 14th time this year for the pattern of +1/-1 -prices closing higher after falling the day before. On the previous 2008 occasions, these indices had seven gains in excess of two percent the following day. The NASDAQ had seven moves between one and two percent, while the other two measures had four increases in this range.

For the Record:

Comparing today’s gains for these three averages with their record, as posted yesterday, reveals results in line with the past. The DJIA had 13 gains compared to 7 declines, while the S&P500 had 9 advances and only 4 declines. Accordingly, the near 2:1 past ratio of gains to losses would lead to an expectation of a further gain on the next day.

DJIA 1.30 percent

NASDAQ 1.36 percent

S&P500 1.75 percent

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Major Decline Follows Lehman Bankruptcy

Monday, September 15th, 2008

September 15, 2008


International markets, as well as our own, reacted sharply to the uncertain prospects arising from a feared liquidity crunch. Where the leverage of financial giants caused substantiak gains in the past, these, in turn, would escalate to large losses, and even failures, in the future.

Accordingly, equity prices plunged. The S&P500 dropped -4.65 percent, the largest loss since September 2001. More over, there are only 13 other days, since 1950, that this index fell more than today; and only two occurring since January 2000

The DJIA fared little better, going down -4.42 percent. This also was its worst day since September 2002. Such a huge, daily loss is also rare for this index: the DJIA has just 20 other daily losses deeper than -4.0 percent.

The NASDAQ loss was substantially smaller, at -3.26 percent. This index’s history, however, shows many closes n excess of - 3.0 percent. Since it started trading in 1975, it had 148 other such daily, losses. Indeed, two such closes occurred this year; with one in January and the last one on June 27.

As for the day following these steep losses, the S&P500 recovered on nine occasions, falling further just four times. Whereas one of these was the -20.5 percent loss in October 1987, the nine recoveries were all above 1.68 percent, with two closes higher than five percent.

The DJIA record for the next day is similar, with thirteen gains and seven declines. Here again, the deepest loss was on October 19, 1987. When the DJIA did go positive on the next day, it recorded three gains less than one percent and three advances greater than 4.7 percent.

DJIA -4.42 percent

NASDAQ -3.26 percent

S&P500 -4.65 percent

Small Changes End Week

Saturday, September 13th, 2008

September 12, 2008


Up and down trading dominated the day but at the end, the indices remained more or less where they closed on Thursday. While the DJIA lost -.14 percent, the NASDAQ rose .14 percent and the S&P500 added .20 percent.

The market rarely posts such small changes. Since 2000, the S&P500 closed only 297 times in the zero to plus .25 percent range. The NASDAQ had 180 in the same period. Moreover, there are only 70 days like today, with both indices changing by this small amount.

Today is only the third time this year that the DJIA declined while the NASDAQ and S&P500 posted their third straight positive close. Indeed, there are only 39 days, since 1971 and 12 days in this century when this combination occurred. The graph below shows these days as vertical lines on the S&P500 time line. Almost all are near current or future price declines.

n-and-s-up-3-d-down-1.gif

As for the week, all three indices moved up for the first time in four weeks. Even with this uptick, the DJIA remains below its Friday close five weeks ago. The other two indices are even further behind, not yet reaching their level of July 18, eight weeks ago.

DJIA -.10 percent

NASDAQ… .14 percent

S&P500 .20 percent

A Further, Significant Advance

Thursday, September 11th, 2008

September 11, 2008


The NASDAQ gained 1.32 percent, its largest increase since August 22, 13 days ago. The S&P500 was up 1.39 percent while the DJIA, the strongest index of the day, increased 1.46 percent.

Today is the 28th time in 2008 that all three indices advanced more than one percent. Of the 173 trading days of the year, only 16 managed moves at a stronger rate than today.

To consider what might happen tomorrow, we look at the closing pattern of the last three days. The sequence is +2/-1, that is, increases today and Wednesday, following Tuesday’s decline. In the previous seven cases of 2008, this combination was followed by three up days for the NASDAQ and the S&P500, and two positive days for the DJIA. Moreover, the last two occasion of this pattern saw all three indices declining on the following day.


For the Record:

Comparing today’s gains for these three averages with their on balance 2008 record, as posted yesterday, reveals that today is their third straight uptick in a row. This result is consistent with their past: more advances than declines in this sequence.

DJIA 1.46 percent

NASDAQ 1.32 percent

S&P500 1.39 percent

Positive Closes Today

Wednesday, September 10th, 2008

September10, 2008

Stocks recovered, regaining some of their losses of Tuesday. The pattern describing all three indices for the past two days is +1/-1 – or, in words, an advance following yesterday’s decline. So far this year, there have been 14 such sequences.

As for the next day, the NASDAQ had nine increases, the S&P500 had 8 upticks and the DJIA had an even number of decreases and increases.

One further consideration is that on the last two repeats of this pattern, all three indices closed higher on the following day.


Considering the overall pattern of trading in 2008, the NASDAQ has closed higher on 78 days, and has lost ground on 92 days. This record makes for a positive/negative ratio of only 45.9 percent. By contrast, in 2006, selected as the last all growth year, the NASDAQ positive/negative ratio was 53.4 percent

The DJIA has done better, with a 49.4 percent ratio in 2008, compared to 54.2 percent positive closes in 2006.

The S&P500 is the only index with more upticks than declines this year; it has a 51.5 percent ratio. Nevertheless, it too, is off the 2006 pace, when it had 56.2 percent positive closes.

For the Record:

Comparing today’s gains for the three averages with their history, as posted yesterday, shows that their advances today are consistent with the past pattern of more advances than declines.

DJIA .34 percent

NASDAQ… .85 percent

S&P500 .61 percent

Prices Fall as See Saw Continues

Tuesday, September 9th, 2008

September 9, 2008

Losses wiped out yesterday’s gains, continuing the market’s pattern of alternate gains and losses. So far, in September’s six trading days, the NASDAQ has only one positive close; the S&P500 moved higher on two days, while the DJIA has three advances.

It was the worst day of the year for the S&P500: it dropped -3.42 percent. While the other two indices had smaller losses, nevertheless only ten percent of their 2008 losses were deeper than today’s.


Looking at the record for this year to see what might happen tomorrow, there are more up days than down days for these indices. The S&P500 has the best record, with 18 positive closes and 10 negatives, for the day following a decline. The DJIA has 17 higher closes. The NASDAQ has the worst record, with the 15 negative days outnumbering the 13 positive ones

DJIA -2.44 percent

NASDAQ… -2.64 percent

S&P500 -3.42 percent

NASDAQ Finally Moves Higher, but

Monday, September 8th, 2008

September 8, 2008

Finally, after posting five straight days of losses, the NASDAQ closed up . . . but by just .62 percent. Moreover, that happened late in the afternoon. Meanwhile the DJIA and the S&P500 scored gains in excess of two percent.

Such a configuration happened just 16 times in the past, and never in this century. In fact, the last occurrence was in 1988! Consider the graph below, which plots the closing prices of the NASDAQ between 1970 and 1990. With the vertical lines identifying the dates of these events, it indicates that 12 of these days came during the market decline of 1973 – 1975. The other four are associated with the drop in 1987.

nasdaq-up-less-than-7-other-two-up-by-2.gif

 

These findings require caution before applying history to current projections, simply because of the long time involved. It is reasonable to expect behavior to change over this period – just as the technology of trading is not the same now as then.

Nevertheless, in that earlier period, on the following day, the NASDAQ moved higher on 12 of those 16 days, whereas the DJIA and the S&P500 scored only ten advances.

DJIA 2.59 percent

NASDAQ… .62 percent

S&P500 2.05 percent

NASDAQ Down for Fifth Session

Friday, September 5th, 2008

September 5, 2008

While today’s NASDAQ loss was the smallest in a week, it, nevertheless fell once more. Since January 2000, there have been just 32 such strings of five successive losses.

In contrast, the S&P500 eased up .44 percent, posting its first positive close in five days. The DJIA also had a mild increase, of .29 percent, changing its direction to positive from yesterday’s decline.

This pattern, the NASDAQ having five successive negative closes, while the other two indices had single day increases, occurred just five times in the past nine years. Moreover, on the next day, all three indices fell four times, and increased on only one day.

Considering the next day for the NASDAQ’s 32 incidents of five straight declines, 19 were positive while 13 went negative for the sixth day. Moreover, none of these series of five straight declines took place during the drastic decline of 2000 to 2002.

As for this week’s performance, the three indices have fallen back to their levels of Friday, July 11, some nine weeks ago. It was the DJIA’s fourth straight losing week and the third for the NASDAQ and the S&P500.

DJIA .29 percent

NASDAQ… -.14 percent

S&P500 .44 percent

Losses Reach Three Percent

Thursday, September 4th, 2008

September 4, 2008

Falling prices kept falling further, and as the day wore on, the NASDAQ dropped -3.20 percent at the close. The DJIA and the S&P500 declines although smaller, nevertheless, came to -2.99 percent.

This was the third deepest loss of 2008 for the NASDAQ while the other two indices suffered their 10th largest drop of the year.

Moreover, today’s declines are in the tenth percentile of all losses since January 2000. That is, only 10 percent of the 809 trading days in this century endured losses in excess of today’s.

This close is the fourth negative day in a row for the NASDAQ and the S&P500, and whereas the DJIA had a positive close yesterday that was a mere 14 percent, for analytical purposes, we consider it so close to zero, that it will be treated also as a four day drop.

In this version, then, today’s close represents the 14th time, since 2000, that four straight declines occurred.

The result, from looking at the past, to ascertain the changes on the following day, is somewhat reassuring. The NASDAQ had nine upticks, but only four declines, after falling four days in a row. The DJIA and the S&P500 were only a bit behind, with five declines but eight increases on the next day.


DJIA -2.99 percent

NASDAQ… -3.20 percent

S&P500 -2.99 percent

NASDAQ and S&P500 Down for Third Day

Wednesday, September 3rd, 2008

September 3, 2008

The market slide continues, and although the DJIA rose today, its gain was a mere .14 percent.

The pattern of closes since last Friday then is -3 for both the NASDAQ and the S&P500, and 1/-2 for the DJIA. This is only the 15th time, since 1950, for this tally – and the fourth time in this century.

While these days can be associated with bear markets, there are nevertheless, occurrences when prices were not declining.

Moreover, while recent USMarketView reports seem to emphasize the message that many of the latest results are similar to observations, in recent years, when prices were in a substantial decline, a brief look at closing prices to date, since January 2, reveals that despite frequent losses, these indices are moving higher. Albeit that they are substantially below recent highs.

closes-jan-2-to-sep-3.gif

 

 

 

 

 

 

 

 

 

 

 

 

Therefore, while the earlier recovery stalled in mid-May, and losses continued until mid-July, the recent trend has been up, even though declines outnumber increases as of August 11. In short, to summarize, despite many negative signals, it is far from clear that prices are in a downtrend. Indeed the market remains significantly above the lows of March.

DJIA .14 percent

NASDAQ… -.66 percent

S&P500 -.20 percent