Prices soared, and reminiscent of the last more than 2 percent session this past Thursday, the NASDAQ added 2.76 percent; the S&P500 gained 2.35 percent and the DJIA rose 2.10 percent. Consequently the NASDAQ now has four gains in a row, whereas the other two indices gains are the first since yesterdays small losses.
However the history of this pattern does not to provide a useful tool for projecting the path of future price changes. Whereas today marks the fourth repeat since the March 2009 bottom, the previous market between 2003 and 2007 also had just four. On the other hand, eight occasions happened during the previous 2000 to 2003 decline. Accordingly this pattern is more common 8 to 4 in declines before 2007; yet is more frequent 4 to 0 in the later period.
Moreover, turning to the magnitude of todays gains and similarly associating these with rising and falling price trends, reinforces the impression that, in addition to the frequency count, the size of these gains has more association with declining, rather than, periods of rising prices.
The lower figure reveals that most of these 73 closes came when prices were in decline. Of the 73 incidents since January 2000, 26 came during the 2000 to 2003 decline, while another 28 happened in the 2007 to 2009 decline. Furthermore, only three of the 1,154 trading days between 2003 and 2007, when prices were rising, showed gains like todays.
With only these broad outlines, a projection for the future requires significant qualification. Nevertheless, because todays characteristics represent the second negative insinuation, when almost all of the previous projections pointed to higher future prices, attention is warranted.
DJIA 2.10 percent
NASDAQ 2.76 percent
S&P500 2.35 percent