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Prices moved lower and higher during the session then closed with the NASDAQ up  .03 percent and both the DJIA and the S&P500 down  -.34 percent. Hence, after Monday’s substantial gain, the NASDAQ pattern is ‘plus two’ gains in a row whereas the configuration for the DJIA and the S&P500 is ‘minus one/plus one,’ or today’s decline after Monday’s gain.

Such a result allows bears to conjecture yesterday’s sharp rise as a simple flare-up, not contradicting their belief that the negative trend, established earlier, will hold in the future. And the bulls can believe that the small change, after yesterday’s large correction, confirms the forecast of higher values in the future, despite the recent falloffs.

Turning to the record, previous to today, we find 201 repetitions of this pattern, with 34 occurring since January 2000. The diagram of the S&P500 identifies these with a triangle, and the turning points of the last two cycles with a vertical line. 

The numbers along the bottom represent the percentage of days with this configuration in each of the four cycle phases.Clearly, these show that rate of these events is smaller in the decline than in the following upswing. So the first recovery frequency of 1.38 percent exceeds the earlier downturn frequency of .76 percent of all trading days.

Further, the   ratio of these two proportions is 1.67; significantly, it is identical to the following pair of down-then-up frequencies. There seems no explanation for this equality, and its appearance is unexpected.

Can we infer, then, that the identity of the current numbers with that of the closed, historical cycle indicates that, while the ultimate direction of the current market remains uncertain, that there exists strong evidence that the bull market is not over?

Yet, short of further evidence, an equally persuasive case can be made for notion that the increasing occurrence ratio in each and every period simply shows a rising trend. That on its own, the significance is historical rather than predictive.

DJIA              - .34 percent          NASDAQ        .03 percent                   S&P500          -.34 percent

This entry was posted on Tuesday, May 11th, 2010 at 12 072010000000Tue, 11 May 2010 19:22:40 +0000 and is filed under Market Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.