USMarketView

January 15, 2009

Finally, after six negative closes and a drop of nine percent, the DJIA turned up.  It was a welcome turnaround, even if the uptick was small, and came only after the index was falling most of the day.  The combination of a positive day after six straight declines has occurred only 56 times since 1950, seven of which came after January 2000.

Considering these seven days relative to the rise and fall of the market, it is not clear whether this pattern is associated with periods of increasing or decreasing prices.  Three came during 2005-2006, when the trend was up, two in 2000, when the movement was down.  Importantly, the other two closes were in 2002 and 2007, just as the mark was about to fall substantially.

Do not overlook another feature of today’s activity. That is the  1.49 percent increase of the NASDAQ outdistancing the meager gains of  .13 percent by the S&P500 and  .15 percent of the DJIA.  There is only one other trading day that exhibits this wide disparity:  October 24, 2001.

Prices were in an upswing on that date which occurred just shortly after the market halted a substantial decline.  However, that rise was soon to stop, as values first stabilized and then continued to decline over the next several months until hitting the bottom at the end of 2002.

DJIA                 .15  percent

NASDAQ        1.49  percent

S&P500             .13  percent

January 14, 2009

The DJIA dropped almost three percent today, as it closed in the red for the sixth session in a row.  While the NASDAQ and the S&P500 declined even more – -3.67 percent and – 3.35 percent- the DJIA’s string of losses is the more important consideration.

This is the 11^th time since 2000, that the DJIA has followed this path.  Moreover, these all occurred when the market was falling, in 2000, 2001,2002,2005,2007, and 2008. Furthermore, three of these days were in January.

Many observers believe that the action in this first month of the year serves as a reliable predictor of what the rest of the year will bring.  In considering the 16 years, since 1950, when equity prices fell between January and December, this rule of thumb proved to be accurate in each year except two: 1994 and 2001.

In viewing the prospects for this year, and not even considering the current state of the banking system, these statistics provide a sobering perspective.  Additionally, including the possibility of a decline in real Gross Domestic Product makes the outlook for equity prices in 2009 not very promising.

DJIA                 -2.94  percent

NASDAQ         -3.67  percent

S&P500            -3.35  percent

January 13, 2009

The NASDAQ and the S&P500 moved into positive changes today, but not until late in the session.  The DJIA, however, stayed in the red, even though its value increased at the end of the day.  Thus, this index has now declined for five straight trading days.  This in itself is unusual; for as noted in the previous blog the chances of an increase after yesterday’s pattern were two out of three.

There have been just 23 days since the turn of the century when the DJIA fell for five successive days.  Relating these to the pattern of the market, we see that 14 of these occurred when prices were in a long-term retreat.  The other nine came in the bull market between December 2003 and July 2007.

In the past, six straight declines in the DJIA occurred ten times since January 2000:  five times when the market was rising, and five times during declines.  The S&P500 shared this negative momentum only once, while the NASDAQ declined twice.

DJIA                 -.30  percent

NASDAQ          .50  percent

S&P500            .18  percent

January 12, 2009

While all three indices went negative today –with the NASDAQ and the S&P500 off more than minus two percent– focus on the DJIA.  Although its loss was the smallest of the three, at  -1.46 percent- it now has fallen for the fourth day in a row.

Only 13 closes, and all since 1980, exist where the DJIA feel for four straight days while the NASDAQ and the S&P500 registered their second straight drop.  Moreover, just four of these occurred in January, and the last two when the market was declining.

As for the next day, in the past, only one further fall occurred, while prices moved higher in three of following January sessions.  These increases remained small, however, and under one percent, while on the one negative day, the DJIA lost  -.9 percent, the S&P500  -1.2 percent and the NASDAQ  -2.1 percent.    

DJIA                 -1.46  percent

NASDAQ         -2.09  percent

S&P500            -2.26  percent

January 9, 2009

Today’s losses combined with Wednesday’s left prices below last week’s close.  Moreover, values eroded substantially for the DJIA and the S&P500 in the first six trading days of 2009. The DJIA is down  -1.9 percent and the S&P500 lost  -1.4 percent, while the NASDAQ fell just  -.3 percent.

With all three indices down for the year so far, consider the relationship between changes in January and the anticipated changes for the balance of the year.  Even if some pattern can be detected, in general, the comparison fails as a reliable forecaster.  The diagram below plots the percentage change for the S&P500 in January, against the change for the balance of that year for the period 1950 to 2008…

For the 58-year period, these measures changed in the same direction only 35 times.  In the other years, the yearly change and the January change moved in opposite directions.  Thus, the on-going decline in the current market fails to be a significant portend of what may occur to prices in 2009.

DJIA                 -1.64  percent

NASDAQ         -2.81  percent

S&P500            -2.13  percent

January 7, 2009

The worst correction since the beginning of December trimmed values by  -3.23 percent for the NASDAQ,  -3.0 percent for the S&P500, and  -2.72 percent for the DJIA. Losses deeper than minus two percent are not common, and since 1950, occurred only 25 times in the month of January.  Moreover, there are just two times when such losses exceeded three percent in January. Notably, these were part of the declines of 2000 and of 1988. 

Last year, January posted three drops deeper than minus two percent.  For those who feel that the first month is a useful predictor of what is to come for the balance of the year, those declines seemed a strong  forecast of how values were slashed in 2008.

Scanning over the 25 January drops exceeding minus two percent, the one fact that stands out is that most of those incidents came when the markets were in decline.  For example, in the 1980-1990 decade, with nine such losing days, six came when prices were falling.

DJIA                 -2.72  percent

NASDAQ          3.23  percent

S&P500            -3.00  percent

January 6, 2009

Prices resumed their rise that began last Tuesday, December 30, after retreating yesterday.  With gains in the  .69 percent, for the DJIA, to 1.50 percent, for the NASDAQ, range, these results parallel results on the third trading day of the year.

Since 1950, the frequency of increases and decreases for this trading day are about even: 30 gains compared to 28 losses for the DJIA and the S&P500; and 19 gains versus 18 losses for the NASDAQ.

As for the fourth trading day, January 7, 2009, the NASDAQ has 21 increases and only 16 declines.  Indeed, the last losing day for this index occurred seven years ago, in 2002.  The other two indices had their last negative close, on the fourth trading day, in 2003; their score, since 1950, comes to 29 positive changes and 28 negatives.

(Posted 10:45 AM, January 7, 2009)

DJIA                 .69  percent

NASDAQ       1.50  percent

S&P500            .78  percent

(Posted 10:45 AM, January 7, 2009)

DJIA                 .69  percent

NASDAQ       1.50  percent

S&P500            .78  percent

January 5, 2009

Today’s negative close occurring on the second day of the year, is only the 16^th such occasion in the 58 years since 1950. The DJIA’s loss of -.91 percent was the sharpest drop, whereas the S&P500 fell  -.47 percent and the NASDAQ  -.26 percent.  Looking at this setback relative to all losses on this day, reveals it as comparatively modest, since five –or one third- of these declines exceeded minus one percent.

On the positive side, moreover, only 17 gained more than plus one percent.  Thus the conclusion that this year’s result lies well within the historical experience of this day, where changes greater than one percent occur just about half of the time.

DJIA                 -.91  percent

NASDAQ         -.26  percent

S&P500            -.47  percent

January 2, 2009

The past three days have been spectacular:  the NASDAQ gained more than eight percent since Tuesday, while the S&P500 moved up seven percent and the DJIA rose 6.49 percent.  It is unusual, indeed, for the three indices to put together three positive days in a row.  It has happened only 46 other times since January 2000, a total of 2.04 percent of all trading days.

Moreover, only two of these three in a row runs, in 2001 and 2005 occurred in January.  While values rose three percent in 2005, they declined thirteen percent in 2001.

Moreover, no meaningful results result from using the first trading day of the year as a forecaster of what the year will bring. In negative years, the first trading day in January declines as often as it increases. While in positive years, the ratio of declines on the first day is 53 percent while only 47 percent are increases. 

There is one curiosity in the NASDAQ index; it declined on 61 percent of the first trading date when the year posted gains, and increased 56 percent in the years when prices declined.

A reasonable conclusion is that the first trading day of the year has little relevance in predicting what will happen to prices in the rest of the year.

DJIA                 2.94  percent

NASDAQ         3.50  percent

S&P500            3.16  percent