December 4, 2008
Todays reversal dropped prices below Tuesdays closes, continuing the recent pattern of sharp fluctuations. Considering the past performance of the S&P500, when it fell by -2.93 percent or more, following the previous days advance, we find 12 such days since January 2000.
Moreover, ten of these occurred while prices were in a sharp decline; in fact, eight took place since this June, with November having the last three. Thus it is easy to believe that this pattern indicates a period of falling prices.
Yet the other two events, of the total of twelve, marked turning points, days when the market changed direction, and rising prices succeeded long declines.
Therefore, while the odds are 10:2 for further price erosion, there is hope that this last episode foretells, instead, the end of this long decline.
DJIA -2.51 percent
NASDAQ -3.14 percent
S&P500 -2.93 percent