October 22, 2008
In a welcome change from the past two days, the DJIA added 2.02 percent and the S&P500 1.26 percent, but the NASDAQ failed to close higher. In view of the drastic decline since the beginning of September, the question about the markets ultimate bottom is the focus of almost everyone. While yesterdays analysis focused on the 1929 collapse and similarities to todays pattern, today we consider the changes in the DJIA in this century.
The benchmark of the percentage change over 33 trading days ago is appropriate, because this many days have passed since the DJIAs last top. The diagram below plots these changes since January 2000. It reveals what we already know, that we are in the deepest decline of recent times.
Moreover, it also exposes the several other times that we faced significant drops of long duration.But the recovery portions of the past also show the recoveries and reversals into positive territory, where gains equal earlier losses. While this is history, and not a guarantee of the markets future, it nevertheless focuses on the fact that equities have been here before, and then turned higher.
DJIA 2.02 percent
NASDAQ -.73 percent
S&P500 1.26 percent