USMarketView

April 16, 2009

After a slow start, the market picked up and at the close the NASDAQ was up  2.68 percent, while the S&P500 gained  1.55 percent and the DJIA rose 1.19 percent.  This result is quite different –and in the opposite direction- from the tabulation of history described in yesterday’s analysis. There, the expectation, based on past performance, was not only for a decline, but also that if there were gains, they would be than two percent. 

Today’s result, combined with yesterday’s gain, yields a pattern of two successive plus days for the three indices. There have been 502 such closes since 1950, with 172 of these occurring since January 2000.

However, going back one further day, to Tuesday, yields a single decline for the NASDAQ and S&P500 but a two day decline for the DJIA. This pattern is more unique, with just nine before  2000 and three occasions in this century. Basing the call for tomorrow on this record yields an even number of upticks and declines. 

In the past, only one day had a close similar to today’s magnitudes for the three indices. That was in November 2003, when the market was already well on the road to recovery.

DJIA              1.19 percent

NASDAQ       2.68 percent

S&P500          1.55 percent

April 15, 2009

While the NASDAQ scored a positive close, its  .07 percent increase came in far behind the DJIA’s  1.38 percent and the 1.25 percent gain of the S&P500.  This finish is consistent with history: when all three indices fall, then increases follow on the next day, more often than declines.

The pattern established by today’s closes is rare, because the DJIA’s recovery follows two negative days whereas the NASDAQ and the S&P500 upticks come after just a single decline.  Indeed, only twelve such events occurred since January 2000.  An indication of what could be in store for tomorrow can be gleaned from these earlier closes.  The DJIA has 9 declines and 3 gains on the following day, whereas the other two indices negative margins are almost the same, with 8 negatives and 4 positive closes.  Furthermore, two of the losing days registered declines near minus two and minus four percent, whereas the largest gains were below two percent.

Another look at the record, as shown on the following graph, confirms past observations that these closes, in the past, have not clustered when prices were reviving and moving higher.

DJIA                1.38 percent

NASDAQ           .07 percent

S&P500           1.25 percent 

April 14, 2009

That was the story all day long, and results at the end were  -2.01 percent for the S&P500,  -1.71 percent for the DJIA and  -1.67 percent for the NASDAQ.  It was the second decline in a row for the DJIA, whereas the other two indices posted their first loss after three straight gains.

This outcome conforms to the record since January 2000 when, after an identical closing pattern, the ratio of next day declines was more than 2:1.

There have been 65 other days since 1950, when this different  result for the indices –the DJIA falling for a second day, while the other indices recorded their first loss- occurred. Since January 2000, though, there have been only 25. The price declines of these more recent sessions, however, were far smaller, with the median loss running from  -.58 percent to –.74 The price declines of these more recent sessions, however, were far smaller, with the median loss running from  -.58 percent for the DJIA to –.74 percent for the NASDAQ.  Notably, today’s DJIA and the S&P500 losses were greater than 95 percent of all earlier declines.

As for the following day, since 2000, advances outnumbered declines, but not by much, with about 1.5 advances scored for every decline.

DJIA              -1.71 percent

NASDAQ       -1.67 percent

S&P500          -2.01 percent

April 13, 2009

While prices fell and rose most of the day, the closing bell found the DJIA off  -.32 percent whereas the NASDAQ gained  .25 percent and the S&P500 increased  .25 percent. Consequently the two averages posted their third positive day in a row, as the DJIA scored its first down day after increasing for two straight days.

This pattern, of  3/-2 for the NASDAQ and the S&P500, and   -1/2/-2 for the DJIA has occurred nine times since January 2001. Moreover, on the following day, like tomorrow, all three indices posted the same changes, namely nine declines and just four positive closes.

One further observation is material: looking at the past stream of prices on those days,   five happened as prices hit their peak and then declined. On three other days, succeeding prices stayed even, while just one of these combinations came as the market hit a low point and then moved higher.

DJIA               -.32 percent

NASDAQ         .05 percent

S&P500            .25 percent

April 9, 2009

A strong showing by the NASDAQ and the SP500 moved these prices up almost  4 percent, and even the laggard DJIA gained  3.15 percent.  This strong showing, the best in the last 13 trading days, is, however, just the eighth positive close in this span.

Focusing on the pattern of recent closes, today’s is a +2/-2/+4  series. That is, two straight positive closes, after a run of to negative days that followed four successive gains.  This very much of an out of the ordinary event: for all three indices managed it only once since 1950.  That day was October 6, 2006, while the market was moving higher in its resurgence from the previous trough in 2003.

The S&P500 by itself, however, experienced six of these runs in this century, while the DJIA and the S&P500 joined up three times since August 2002.

On October 7, 2006, the day following that only other three index gain, all the indices increased again.  Yet the advances were quite small, ranging from .14 percent for the DJIA to .67 percent for the NASDAQ.   

DJIA                3.15 percent

NASDAQ        3.89 percent

S&P500           3.80 percent

April 8, 2009 

While prices closed above yesterday’s they did not recover all the losses of the previous two days.  Yet at the bell, the indices were lower than they had been most of the session.  At the end, the NASDAQ gained  1.86 percent, recouping more than half of yesterday’s decline. The SP500, however, up by  1.18 percent, recovered just 50 percent of the April 7 loss.  The DJIA was far down in that list; its gain of  .61 percent is less than a quarter of the previous day’s gain.

This outcome of advances is consistent with previous experience, when the gainers outpaced the losers almost 2:1 on the day following two losing sessions that came after four straight positive days.  (Short hand for this pattern is +1/-2/+4.)

Looking at the time path of prices during the last bear market, from 2000 to 2003, reveals that it took that earlier downturn 755 trading days before hitting its bottom. The current decline is just 377 days past its October 2007 peak. The diagram below illustrates this comparison. 

Of course, it is possible that this downturn will be shorter. Support for this conjecture comes from the three bottoms already reached by this market, far ahead of the triple floors of 2003.  Yet if this is not the case, and prices fall some more, it could provide a level of confidence and thus support the sliding market.

DJIA                 .61 percent

NASDAQ        1.86 percent

S&P500           1.18 percent 

April 7, 2009

Today’s decline, sharper than the typical change in the second session after four straight gains, also defied its historical frequency.  In the past both the NASDAQ and the SP500 moved higher three times more often than they fell; indeed, the DJIA ratio stands at 7:1.  Moreover, the NASDAQ’s two “U” turns in this century ranged from  -.92 percent to  -2.91 percent.  Yet it was off  -2.81 percent at the close.  The comparison is worse for the other two indices.  The DJIA’s drop of  -2.34 percent is huge to its only decline of  -.07 percent since January 2000.  Similarly, the SP500 had two earlier losses less than – .74 percent, far smaller than today’s  -2.99 percent.

Looking at history again, to anticipate what the market may do tomorrow, however, yields a perspective similar to today’s.  As before, increases outnumber the decreases, with ten gains against six losses for the NASDAQ and the SP500.  However, there is only one occasion when all three indices fell for a third day in a row –after four straight increases; and those losses ranged from -2 to -3 percent.  Yet even that past event an optimistic side because it occurred only days before the 2000/2003 bear market hit its bottom.

DJIA                -2.34  percent

NASDAQ        -2.81  percent

S&P500           -2.99  percent 

April 6, 2009

Viewing today’s result as signaling the end of the rebound would be alarmist.  The record shows only a small difference in the number of trading days declining, or falling, after four straight advances.  The fifth day has been a gainer 29 times since 1950 – and a loser 26 times.  While in this century, the ratio of positive to negative days was reversed, with only five moving higher compared to eight reversals.

Yet today’s DJIA and NASDAQ losses are not as deep as their average declines over those eight reversals.  The DJIA dropped  -.53 percent, whereas the mid point of the earlier eight declines is  -.84 percent.  The NASDAQ’s loss of  -.93 percent is also smaller than the  -1.24 percent average.  Only the S&P500 fell more today,  -.84 percent, compared to its average of  -.77 percent.

Since 2000, the score on the following day is six advances to two retreats, with the DJIA posting seven advances.  Moreover, while most losses were well below minus a half percent, many of the increases exceeded two percent.  (The NASDAQ fell  -2.91 percent on its worst close but soared 4.14 percent on its best.)

DJIA                -.53  percent

NASDAQ        -.93  percent

S&P500           -.84  percent 

April 3, 2009

Prices moved higher for the fourth consecutive day, even though the market did not turn positive until late in the day. While the increases were the smallest of the week, today’s close is only the 16^th time since 1950 that these three indices, together, scored four straight increases. 

Moreover, only seven of those occurred after the market had dropped twice in a row, as it did this past Monday and on Friday of last week.

In considering the future and what to expect when the market reopens after the weekend, note that it is even more unusual for all the three indices to sustain the momentum  and to succeed in scoring a fifth straight advance.  There were just 29 of these since 1950 with five occurring since  JAnuary 2000.

DJIA                .50 percent

NASDAQ       1.20 percent

S&P500           .97 percent 

April 2, 2009

The DJIA and the SP500 enlarged their daily increase for the second time in a row as the current surge posted its third successive positive day.  The NASDAQ more than doubled yesterday’s gain, closing up  3.29 percent.

Three gains in a row by all three indices have occurred only 48 times since January 2000.  Yet this tally divides almost evenly between the 2000-2003 decline and the 2003-2007 recovery.  On the other hand, extending the record two further days, on which these indices posted declines, then eight of those 22 closes coincided with the trough of the price turn down.

This was the case on the third, and final, bottom on March 14, 2003, and indeed, this same pattern count coincided with the recent, previous low of November 25, 2008.

The diagram below illustrates this history.

DJIA                2.79 percent

NASDAQ        3.29 percent

S&P500           2.87 percent