April 29, 2009
Strong from the beginning, prices survived the GDPs substantial drop. At the close, the NASDAQ was up 2.28 percent, followed closely by the S&P500s 2.16 percent and the DJIAs 2.12 percent.
This first up-tick follows two straight declines. Looking at the history of this 1/-2 pattern reveals 245 such closes since 1950, 81 of which occurred in this century. What’s more, only 12 of these latter days scored increases as great as or greater than todays 2 percent.
This strength, however, need not indicate we are at the bottom. Four of the greater than two percent days came at the beginning of this current bear market. October 2008 had four of these closes, with gains larger than ten percent. Yet, rather than further appreciation, prices were just at the beginning of this huge decline.
Yesterdays post failed to spotlight todays potential gains; instead, by focusing on last Wednesdays increase of the NASDAQ while the other two indices declined, it described the patterns following that disparate close.
In the past, the next day following this 1/-2 pattern, achieved gains at more than twice the rate of losses if they came after increases larger than one percent but less than two percent. However, the reverse is true losses double the number of increases- if they followed increase larger than two percent.
DJIA 2.12 percent
NASDAQ 2.28 percent
S&P500 2.16 percent