USMarketView

February 11, 2009

Prices recovered today, but the gains failed to come anyway near making up the sharp reversals of the day before.  The S&P500, led with a  .79 percent increase, followed by the DJIA with  .64 percent and the NASDAQ finished last, at  .38 percent. 

This positive comeback is welcome, of course, but it is far smaller than past changes, on the next day, following deep losses by all three indices.  Those top gains were in the  6.6 percent range, while the average ran from 1.31 percent for the NASDAQ to 2.15 percent for the DJIA.

On the downside, when the indices retreated further on the following day, losses were substantial.  The NASDAQ’s sharpest decline was  -9.0 percent; the S&P500’s greatest was  -6.7 percent and the DJIA fell  -5.6 percent.

While the uptick in itself was a relief, it came in close to the following day results of the past.  Since 1987, the NASDAQ moved up on 10 of the following 17 days;  whereas the other two indices moved ahead 12 times. 

In summary, the day’s results are in line with the past, except that the size of the restoration is significantly less than the record.

DJIA              .64  percent

NASDAQ      .38  percent

S&P500         .79  percent

February 10, 2009

The S&P500 dropped  -4.91 percent today, experiencing the 25^th steepest one-day loss in our database that begins in 1950.  The DJIA decline of  -4.62 decline is also its 25^th worse close.  While the NASDAQ fall of  -4.20 percent was only its 62^nd  in that record that goes back to 1975.

Lining up the losses in this order –with the worst daily performance at the top- reveals that there are only three dating back earlier than 1987!  While there are an additional three in 1987, the other19 of the 25 deepest declines occur between 1997 and today.  One important conclusion from this comparison is that both the DJIA and the S&P500 are experiencing sharper reversals in the past ten years than in the previous 50.

One further note on today’s market performance is that only 17 other dates exist on which these three averages together lost as much percentage wise, with only four between 1975 and 1999.

Plotting DJIA closes between 1987 and today, as shown below, reveals perhaps a glimmer of hope for the future.  Since the vertical lines indicating these 17 reversals tend to coincide with falling prices, nevertheless, most occur just about when the slump is at the bottom.But note the concentration in the current decline, without any relief so far.

DJIA              -4.62  percent

NASDAQ      -4.20  percent

S&P500         -4.91  percent

February 9, 2009

The NASDAQ almost stayed on even keel, losing just  -.01 percent, while the DJIA was off  -.12 percent but the S&P500 managed to edge higher by   .15 percent.  Today’s divergent closes is the 21^st such occasion over the 2285 trading days since January 2000. 

Moreover, the amount of change on those other days is just about the same as today’s, with the average gain of the S&P500 being  .08 percent, while the DJIA declined  -.13 percent and the NASDAQ, with the exception of one loss of  -1.45 percent, averaged  -.16 percent.

The average change of each index on the following session was even smaller, ranging between  -.03 percent for the NASDAQ and plus .03 percent for the DJIA and the S&P500.  However, while most results were quite small, they did include changes of as much as plus to minus three percent. Overall, these two indices rose on eleven days and fell on nine, whereas the NASDAQ had an even number of gains and losses. 

DJIA              -.12  percent

NASDAQ      -.01  percent

S&P500          .15  percent

February 6, 2009

All three indices moved ahead, substantially, for the second straight day, as the NASDAQ increased  2.94 percent, while the DJIA and the S&P500 added  2.70 percent.  The only other two-successive plus day this year was on January 16.  Yet five such repeats occurred less than two months ago, between November 24 and December 31, 2008…

The indices also scored major gains then, with the S&P500 having the largest, at  7.52 percent.  Moreover, all indices increased more than one percent four times out of five.

However, the negative closes dominated the next day, with minuses leading the pluses five to two.  Furthermore, while the upside numbers were concentrated below plus .5 percent, the declines came to as much as  -5.8 percent and only one negative day stayed above minus one percent.

DJIA              2.70 percent

NASDAQ      2.94 percent

S&P500         2.69 percent

February 5, 2009

After yesterdays’ positive closes, the market moved higher adding another step to the ongoing up and down pattern of these indices.  Today’s change in direction is the fourth in the last seven days.  The history of the DJIA and the S&P500 shows just 11 such days since 1954, while the NASDAQ has nine since its record started in 1970.

Four of these eleven closes came when prices were reaching their peaks between 1994 and 1998, with a fifth at the top in 1976.  There were two near the bottom in 1988 and 2002; three when prices were moving higher in 1954 and the 1970’s; and one last June, when prices were moving lower.

The next day brought higher prices in the past, with the DJIA leading with 10 gains and 1 decline, while the S&P500 moved higher nine times.  The NASDAQ’s shorter record shows five increases and four declines

DJIA              1.34  percent

NASDAQ      2.06 percent

S&P500         1.63  percent

February 4, 2009

The market reverted to the recent pattern of significant variability in daily closes. Negative days following positive closes, and down turning to ups on the following day characterize the action of the last few months.  In line with that pattern, while yesterday was a gainer, today was a loser: the DJIA dropped  -1.51 percent, the S&P500  -.78 percent, whereas the NASDAQ was off a mere  -.08 percent.

A casual inspection of the data hints that the daily price variability of these indices is linked inversely to the trend of prices.  In bull years, the changeability seems far smaller than when prices are falling.  The diagram below compares the S&P500 closing prices with their rate of change since the beginning of 2008.

Even a glance at this information confirms that indeed, larger daily price changes occur when the S&P500 declines than when the index rises.  Moreover, there has been a decline, albeit a small one, in the daily rate of change since the steep slide of last autumn has become less severe. 

Perhaps the latest pattern of reduced volatility signals that the market is near the bottom.  Or possibly the fractured financial system and the reversals hitting business means that recovery is still distant.  Nevertheless, it is clear that focus on alterations in the rate of change yields insights on the market’s behavior.

DJIA              -1.51  percent

NASDAQ       -.08 percent

S&P500          -.78  percent

February 3, 2009

The DJIA and the S&P500 scoring their first gain in three days, joined   the NASDAQ as it posted its second successive increase.  This pattern of changes at the close–the DJIA and the S&P500 showing one gain after a losing day, while the NASDAQ having two increases in as many days–occurred just 28 times in the 2,283 trading days since January 2000. 

While 13 of these runs were in the five positive years, the other 15 took place during the four losing years in this century.  The advances on the second day, ranged from a low of  .03 percent to a high of  11.8 percent.  That largest gain was just months ago, on October 13, 2008.

On the following day, the S&P500 moved ahead 13 times, declining on the other 15.  The DJIA and the NASDAQ, however, did not do as well advancing only 11 times and falling on 17 days.  Moreover, the drops on that next day were as sharp as minus three percent for the DJIA and the S&P500, while the NASDAQ fell as much as minus five percent.

The numbers on the plus side were not as high, ranging from 1.5 percent for the S&P500 to 4.19 percent for the NASDAQ.

DJIA               1.78  percent

NASDAQ       1.46  percent

S&P500          1.58  percent

February 2, 2009

At the close, the indices were a mixed bag.  The NASDAQ was up 1.22 percent, while the other two declined.  The S&P500 fell just  -.08 percent and the DJIA lost -.80 percent.  Only 49 days share such a pattern.

With seven of these occurring since January 2000, and two last year, their next trading days had quite strong results.  All the indices posted gains on five of the following days.  Moreover, all increases bettered one percent, with one moving more than three percent higher.

Following up on the impact of January closes on results for the full year, discussed in last Friday’s post, here are the possible changes projected to December 31, 2009, based on a simplistic technique that, in itself, explained less than 35 percent of the variation in year end results.

The forecast changes for all of 2009 run from  -14 percent for the NASDAQ to  -19 percent for the S&P500; and with last month’s losses near two percent, the projected declines between now and the end of the year are somewhat modified.  The remaining correction between now and December 31 for the S&P500 is  -11 percent, -8.2 percent for the NASDAQ and  -7.8 percent for the DJIA.

This projection must be viewed with extreme caution, based as it is, on a raw and simplistic model, which fails to explain even 40 percent of year-end results of the past 57 years.

DJIA               -.80  percent

NASDAQ      1.22  percent

S&P500         -.08  percent