The rise in the unemployment rate offset the promises for recovery by other data while the news of further unrest in Europe and continued puzzlement about Thursdays trading exacerbated, rather than resolved, the unease of market watchers. Thus, ex post at least, the week closed with a further decline of prices.
The worst hit was the NASDAQ, losing -2.33 percent, whereas the S&P500 dropped 1.53 percent and the DJIA fell 1.33 percent.Four consecutive losses are not routine, let alone all three indices affected simultaneously. Nevertheless, todays is the 17th since January 2000 and the 47th going back to 1950. The NASDAQ fell -9.33 percent over the four days, the S&P500 -7.6 percent and the DJIA -6.92 percent. Ranked in order of severity, these results score as the fourth worst of the last 17 four-in-a-row experiences.Yet the mere occurrence of these negative runs does not translate into a market top and a forthcoming trend of falling prices.
The diagram shows the S&P500 closing prices since 2000, and indicates when, and the percentage this index fell over four days, when all three indices absorbed four declines in a row.Whereas some of the episodes occur immediately before the beginning of substantial declines, others, as in 2003, cross the tape at the markets bottom. Since others appear when no substantial market changes follow, the down four-in-a-row fails to provide guidance for foretelling market direction.
Nevertheless this negative conclusion provides valuable information: history fails to show that price recessions automatically follow such four in a row declines by the three indices. Indeed, looking at the record, on the day following, the NASDAQ moved up 10 times, falling six times. The DJIA and the S&P500, similarly, scored 9 gains and 7 declines.
DJIA - 1.33 percent NASDAQ - 2.33 percent S&P500 -1.53 percent