Todays pattern, of five negative days for the DJIA while the NASDAQ and the S&P500 fell, is only the third such occurrence in our data base that begins in 1950. It last appeared at the beginning of 2005.
Sorry to stop this post the computer just got stuck!
Since 1950, 14 other days encountered this pattern, 4 of which occurred since January 2000. However, none of these closes approached the size of todays losses. Focusing on when these last 4 occurred with respect to the price trend at that time, there seems no relationship: 2 shared rising prices and 1 happened just before values hit bottom in January 2009. Yet considering only the price action of the following day, in the past increases outnumbered declines.
Lets discuss these results in context of yesterdays, June 28, post. Of course that focused on the future, and concluded that recent patterns implied rising prices. Yet todays deep losses contradict that projection. It would be surprising if readers do not feel let down by this sequence. And attempting to justify this contrast by claiming that the forecast is for the long term, while todays changes in values refers to the everyday ups and downs of the market, will fail to put to rest the notion of frustration.
Nevertheless, the outlook for the long term, for the direction of prices over the next few months, is uncertain. This indecisiveness results from the continuing turmoil in the worlds financial markets, from the
Surely such contrariness is alarming; so it should not be surprising that markets respond to such turmoil with drastic revaluations.
DJIA -2.88 percent NASDAQ -3.96 percent
S&P500 -3.37 percent
Considering the extent and the range of this trading, and recognizing that it fits into the interval of minus .25 percent to plus .25 percent, we identify these on the accompanying diagram. Of course the magnitude of the zone is arbitrary; it nevertheless permits a logical approach to ascertaining the markets volatility. Since only 610 sessions of the 2,632 trading days since January 2000 fall into the bracket, the chosen range represents only the smallest 25 percent of all daily changes.
2000 38; 2001 40; 2002 37; 2003 51; 2004 86; 2005 78;
2006 100; 2007 79; 2008 30; 2009 40; 2010 to 6/25 29.
You can find the actual count of the dates in this small change group for the past ten years and the last six months just above the horizontal axis. A quick scan of the numbers, combined with a glance at the S&P500 closing prices, reveals a coincidence of incidents and price trends.
The first three years, when values fell, show a much smaller count than occurred during the 2003/2007 expansion. Similarly the incidence decreases during the following decline, between 2007 and 2009. Finally, so far in 2010, the count of these small change days, at 29 for near the first half of the year, seems in line with the earlier mold that the trend of price increases and the number of small change sessions run on parallel tracks.
Accordingly, a market projection, consistent with these facts, would favor a scenario of prices moving higher.
DJIA -.05 percent
NASDAQ -.13 percent
S&P500 -.20 percent
At the close, prices failed to move very much from Thursdays results. Yet the DJIA declined -for the second day in a row- minus -.09 percent, whereas the S&P500 and the NASDAQ edged up by .29 and .27 percent. The record reveals 64 previous sessions since 1950 with this pattern, 22 of which occurred since the 2000 market peak.
The diagram, indicating these closes with a triangle, shows their distribution over the last two price cycles. However these incidents seem to have almost no relationship with bear or bull phases of the market. For example, the proportion of these days, relative to total trading days, is .94 percent in the first decline and .95 percent during the following upswing. Similarly, the proportions seem near identical at .56 percent and .61 percent- in the second decline and recovery.
Indeed, evidence of any association appears time related, with the first set having near double the incidence of the later pair. Consequently these data and their analysis provide slight information about the direction of prices in the future.
The sequence of near stationary days, intertwined with occasional much larger gains and declines, however, deserves attention. Whether these episodes have associations with stable or changing price history deserves further analysis.
DJIA -.09 percent
NASDAQ .27 percent S&P500 .29 percent
Losses ran deeper than on Tuesdays, just two days ago. The S&P500, down -1.68 percent suffered the biggest drop. But the NASDAQ at minus -1.63 percent, was not far behind. Both these indices, not turning in a positive close this week, experienced their fourth straight down day. The DJIA, after its microscopic .04 percent gain yesterday, lost 1.41 percent.
Though the DJIA pattern is -1/+1, because the insignificance of yesterdays advance, this analysis treats this index as if it also had four losses in a row. Ordinarily, we treat market changes as they are; our rule is to tell it like it is. However, allowing this change for these results provides a meaningful insight.
The diagram of the S&P500 closing prices since 1990 indicates all four-losses-in-a-row with a triangle. The vertical lines represent the dividing lines of the bear and bull markets. The proportion of the four in a row declines is at the bottom of each segment.
The two largest readings, .81 percent and 1.70 percent, took place during market declines, whereas the 2003/2007 expansion had only .43 percent four straight declines sessions. These differences indicate that four losses in a row are more common in falling, than in rising, markets.
But turning to the present expansion that started in 2009 we find that the current result cranks that ratio to .92 percent of its 323 sessions. Given the uncertainty of price expectations and the recent lack of direction in the market, this communality of proportion, of the ongoing market with the record, supports a cautionary attitude.
Note that most of the MarketView projections of this nature support expansion, whereas todays interpretation is only the second or third that is not consistent with expansion.
DJIA -1.41 percent NASDAQ -1.63 percent
S&P500 -1.68 percent
Both the NASDAQ and the S&P500 fell for the third successive session, whereas the DJIA after its two day decline- made it into the plus column, but by just .04 percent. Accordingly, todays pattern is -3/0 for the NASDAQ and the S&P500; it is +1/-2 for the DJIA.Only 17 previous sessions have this combination, 6 of which happened since January 2000. Changes on the following day are distributed equally between advances and declines for the DJIA and the S&P500. However the NASDAQs record reveals 12 gains compared to just 5 declines. Yet the number of up and down dates since 2000 is tied at plus three and down three.
DJIA .04 percentNASDAQ -.33 percent
S&P500 -.26 percent
The NASDAQs loss of - 1.19 percent following a stretch of seven positive sessions, is its deepest since June 7. Yet it was smaller than the S&P500s -1.61 decline as well as the -1.42 percent of the DJIA; and for these indices, the worst day since June 4.
Todays pattern of two declines in a row becomes the 141st repeat since January 2000. Those previous falling sessions suffered setbacks ranging from -.01 percent to more than 9 percent, although their average declines clustered around minus -1.5 percent. The following day, in the past, experienced more advances than declines, with the positive frequency about 125 percent of the number of declines.
The losses of the past several weeks, rather than being distributed similarly impacted each of these three indices differently. The diagram, showing the daily closes as a proportion of the October 2007 high, details these differences. The NASDAQ, currently at 80 percent of its high, regained more ground than the DJIA and the S&P500, since the bottom in March 2009. The two averages have changed places several times over the cycle, and currently stand at 70 percent for the S&P500 and 73 percent.
Hence focusing on such differences provides opportunity for gains, even as the total value of all assets is declining.
DJIA - 1.43 percent
NASDAQ -1.19 percent
S&P500 -1.61 percent
Prices fell for the first time since last Wednesday, with the NASDAQ falling -.90 percent, the S&P500 off – .39 percent while the DJIA closed at -.08 percent. Thus the odd, unusual character of daily changes continues for another day.
As before, this combination is a first; so without a record of past closes for the next day, there cannot be a projection based on history. Yet some data are available: 140 turn-arounds from negative to positive occurred since January 2000. However, on the following day, declines outnumbered gains by about 30 percent.
DJIA -.08 percent NASDAQ -.90 percent
S&P500 -.39 percent
Fridays trading, in summary, presented another set of small changes, and another first in the frequency count pattern. The NASDAQ scored its 7th straight gain; the DJIA had its 4th successive up-tick while the S&P500 increased for the second day in a row.
A unique pattern that never has occurred before. Yet the NASDAQ record shows as many as 19 straight advances but only 11 sessions of 7 in a row, like today. More important for the future, all happened when prices increased: 7 during the 2003/2007 expansion and twice since the last trough on March 9, 2009.
Todays gains came in a bit above Thursdays, with the DJIA up .16 percent, the S&P500 increase of .13 percent and the NASDAQs plus .11 percent.
Motivated by the recent cluster of small changes, we examined the frequency of changes in the range of minus .25 percent to plus .25 percent. The figure shows the results for the DJIA during the two recent cycles. These concentrate more in rising markets than in the bear phases.
Only 14.1 percent of all trading days [These are marked in red.] experienced this combination while prices deteriorated between 2007 and 2009; in contrast, these increased to 24.0 percent for the current expansion. Similarly, only 14.2 percent were seen in the 2000/2003 decline but this rate shot up to 33.1 percent a third of all sessions- during the next bull market.
These differences, accordingly, allow a projection of possible future featuring a run of increasing valuations. Moreover, such a scenario parallels the conclusions of yesterdays analysis.
With the continuing uncertainties surrounding the financial markets, well continue to monitor and report on situations which parallel earlier price changes, in both the negative and positive directions.
DJIA .16 percentNASDAQ .11 percent
S&P500 .13 percent
Thursdays market profile, almost a clone of the previous session, finds all three indices advancing but only marginally. The DJIA gained .24 percent, the S&P500 rose .13 percent while the NASDAQ hardly moved, at .05 percent. Increases so small rarely cross the tape. In faction only 56 other days, since 2000, did the NASDAQ advance by a smaller amount. The DJIA similarly shows only 320 gains lower than todays; the S&P500 has 175 gains below todays .03 percent.Todays pattern is even rarer than yesterdays: it is a first for this combination of 6 consecutive NASDAQ advances, 3 increases in a row for the DJIA and the S&P500 moving up after the previous decline.
Accordingly, our analysis focuses on the S&P500 and its distribution of gains smaller than .13 percent over the last two cycles. The diagram reveals that the proportion of positive days exceeds the negative ones when prices are trending up. During the first falling phase, 58.5 percent of all changes were negative day. But during the following recovery, the proportion of down days fell to 43.7 percent.
That tendency continues during the current cycle, with declines amounting to 50.7 percent during the declining price period, and then decreasing to 41.5 percent. Comparison of these last two ratios, however, provides a two-faced view of the future.
That the positive trend ratio of the current recovery exceeds that of the decline that ended in 2009, makes a case for optimism, that prices will trend higher. Yet, since the differences are quite small, during the down and up phases, between the top of 2007 and the recovery of 2009, an equally convincing case of uncertainty, of not necessarily higher prices, is just as convincing.
DJIA .24 percen tNASDAQ .05 percent
S&P500 .13 percent
