October 30, 2008
The market opened higher and maintained its gains to the close. The S&P500 increased 2.58 percent, the NASDAQ 2.49 percent while the DJIA moved 2.11 percent higher. There have been thirteen days, since 1974, with this record. And the NASDAQ posted further increases on all of the next days. The records for the DJIA and the S&P500 are almost as good, with twelve increases and one decrease on the following day.
Another analysis of recent closes yields a different insight but does not contradict the above. It focuses on the frequency count of recent changes, rather than the size of the increase. Note that the NASDAQ now has three positive closes in a row, whereas the other two indices, while increasing today, changed directions three times in the last four days.
There have been 16 of these combinations since January 1950. Now consider the direction of the market when, and shortly after, they occurred. The chart below plots closing prices of the S&P500 over time, and places a vertical line when each of these 16 days occurred. It is quite clear that the great majority of these happened when prices were topping out or faking. In fact, 13 of these events share this feature, and only three occurred when the trend of prices was up.
NASDAQÂ… 2.49 percent
S&P500 2.55 percent
