Archive for June, 2010

June 16, 2010 — A Strange Day

Wednesday, June 16th, 2010

The three indices closed at almost the same levels as the day before. The NASDAQ’s change so small that rounded to two decimal places it came to plus 0 percent, with the actual increase limited to .00002 percent. The DJIA did move higher, although by no more than .05 percent. The S&P500, however, fell – posting the larger change of the day at -.06 percent.

In addition, today’s pattern added to the atypical character. It was the fifth increase in a row for the NASDAQ, the second for the DJIA, while the S&P500 fell after increasing the day before. Only two other days experienced this combination, one in 1988 and the other in 1993.Perhaps this action results from feeling uncertain about the market’s near term future – and the continuing oil spillage, the possible nascent European situation worsening, as well as the continuing weakness in total employment provide significant reasons for hesitancy and timidity.

 

 

sadj-673-days-into-1895-2000-2007-cycle.gif

Indeed comparing the current price cycle with the previous one of 2000-2007, reveals decay in the current market action. Instead of this cycle continuing to better the earlier one, its progress has declined. Further, at this stage, perhaps current prices will imitate and result in a third pause as before.

The future obviously is unknown; yet insights of what happened in the past –like the current diagram- provides awareness and understanding for today. Knowing the past helps in understanding the future.

 DJIA                       .05   percent

 NASDAQ               0     percent S&P500                -.06    percent

June 15, 2010 — Another More than Two Percent Day

Tuesday, June 15th, 2010

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 yesterday’s small losses.

16-days-nfr-4-and-dfr-sfr-1.png

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 today’s 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.

73-days-increases-greater-than-n276-d-21-s-235.gif

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 today’s.

With only these broad outlines, a projection for the future requires significant qualification. Nevertheless, because today’s 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

June 14, 2010 — Changes Cluster Around Zero

Monday, June 14th, 2010

With only three other closes since January 2000 in today’s range –the NASDAQ up .02 percent and the S&P500 down  -.18 percent while the DJIA fell    -.20 percent – analyzing and relating these changes cannot provide meaningful insights.  Yet there were 16 other days before 2000 matching today’s scale.  On the following day, almost all these earlier sessions posted negative changes; whereas the last three closed higher. DJIA                        -.20   percent

NASDAQ                  02   percent

S&P500                  -.18    percent

June 11, 2010 — Gains Continue – NASDAQ Advance More than Double the DJIA and S&P500

Saturday, June 12th, 2010

Prices moved higher for the second day in a row, but the increases were much smaller. In fact they came to less than half of Thursday’s robust advance. The NASDAQ added  1.19 percent whereas the S&P500 was limited to  .44 percent and the DJIA to .38 percent. Focusing attention on this performance gap because it could provide insights of what prices will do in the future, note that importance results from the size of the disparities.

 nasdaq-over-11-while-s-less-than-5-djia-less-4.gifDisparities in the daily changes occur often but the magnitude of today’s disproportion is unusual. Indeed, only 19 other closes since 2000 have, or exceed, today’s proportions. The diagram of the S&P500 identifies these with a triangle; its vertical lines separate the bull and the bear phases.

Six of these incidents happened during the 741 days of decline between 2000 and 2003; that ratio is .81 percent of all trading days. In the following bull phase,  7 of the 1154 trading days, or .61 percent, experienced a disparity this large. The next phase, between 2007 and 2009, saw 6 such happenings representing 1.69 percent of those 355 trading days.

Accordingly, associating this gap with periods of falling prices is not unreasonable. Yet these differences could be considered minor and therefore unimportant. Nevertheless, during the present period of large daily up then down changes, this variant from the ordinary patterns of relative index performance, could provide an insight into the market’s future direction.

DJIA                         .38    percent                               NASDAQ               1.12   percent                               S&P500                     .44     percent

June 10, 2010 — Strongest Showing since May 27

Thursday, June 10th, 2010

The sharp rise in prices started early; it did not stall, and at the close indices had their best showing in 10 trading days. The S&P500 led the advance with a 2.95 percent move; the NASDAQ was not far behind, gaining 2.77 percent while the DJIA moved 2.76 percent.  Further, the NASDAQ scoring its first uptick in five sessions now has a pattern of +1/-4. The DJIA and the S&P500 sequence, after yesterday’s losses, now is +1/-1.

The market thus continues its unusual pattern – with today’s arrangement only the 12th overall and the fourth since January 2000. In the past, the day following this pattern, prices rose almost as often as they declined. Yet in the four latest, previous occasions, they declined three times, increasing only once.

 djia-and-rate-variability.gifThus Thus the market’s variability remains sizeable. This variance provides a useful tool for anticipating price movements. The accompanying diagram graphs the DJIA closing prices and their daily rate of change since 2000. Substantial price declines associate with greater variability in the daily rate of change, especially when prices experience substantial deterioration. The drop in the 2000/2007 cycle reveals that the daily rates of change diffusing as prices decline. Similarly, the same pattern of greater variability occurred during the 2007/2009 bear phase.

The recent increase in the variability of the daily rate of change thus can be taken as a warning sign. Yet, since this enlargement remains considerably smaller than during the two major prices erosions earlier in the decade, this widening should not be interpreted as an advance signal of prices falling in the future.

DJIA                2.76    percent

NASDAQ        2.77    percent

S&P500            2.95     percent 

June 9, 2010 — Small Losses at End of Day

Wednesday, June 9th, 2010

Prices could not maintain the early morning momentum, so at the close the NASDAQ was off  -.54 percent, the DJIA fell -.41 percent while the S&P500 lost -.22 percent.  It was the NASDAQ’s fourth negative session in a row; but the first losing day after yesterday’s greater than 1 percent gains.

This is only the 12th   repeat of this pattern since 2000 and the 41st overall. It’s worthwhile to note that the daily losses on those previous sequences came in much deeper than today’s results. Further, adding results to the comparison, yields gains for the DJIA and the S&P500 whereas the NASDAQ suffered its third straight decline.Strangely enough, the record shows as many post-2000 incidents, 11, for this pattern as when the NASDAQ closes down three days in a row.Looking at the past to project tomorrow’s changes does not provide significant guidance for projecting the next day. Though the S&P500 result favors a gain, because its record is 7 advances against 4 declines, the DJIA and the NASDAQ record fails to yield a robust outcome. Those indices show 6 gains against 5 losses.

DJIA                -.41     percent

NASDAQ        -.54     percent 

S&P500            -.22     percent

June 7 — Further Decline – But Pattern Seems Positive

Tuesday, June 8th, 2010

Another, sharp decline followed Friday’s drop, as the NASDAQ lost  -2.01 percent, the S&P500 fell -1.35 percent and the DJIA gave up  -1.16 percent. These two set-backs came after two positive sessions, which in turn trailed two advances. Consequently this defines the pattern as -2/+2/-2; however, another way of analyzing the current situation is by counting only the last four days – this yields a -2/+2 pattern.

                                   06-07-2010.gif

The similarities of these two sequences make it useful to consider today’s standing from both perspectives. The diagram differentiates these chains by marking the -2/+2 incidents with a circle, while the -2/+2/-2 circle includes that day’s decline in percent.

Today’s close marks the 47th occurrence of the  -2/+2 pattern, 28 of which came since 2000. The record shows the median loss on those days smaller than today; they are -1.09 percent for the NASDAQ and the S&P500, and -1.04 percent for the DJIA.  

Fewer incidents exist of the longer -2/+2/-2 series; 9 overall with 6 since 2000. Further, these declines on average tended to be a lot smaller than today’s decreases.

Consider the past incidents, and when they occurred, relative to upcoming changes in the trend of rising and falling prices. Obviously many came before price declines.

Yet quite a few developed at the bottom of troughs; these anticipated the end of a period of falling values.Therefore today’s decline may be a sign that the current plunge is at an end.

 DJIA                -1.16     percent

NASDAQ        -2.04     percent S&P500           -1.35     percent

June 4, 2010 — Third Failure to Regain Higher Prices

Saturday, June 5th, 2010

All three indices lost more than three percent today, halting the attempt to return to the growth path of April. Now 25 trading days after the last top, the market has failed to maintain the last of the three robust gains that seemed to promise higher prices.

Today’s graph compares the decline of 2007 with the previous, 2000 cycle. Further, it extends that earlier sequence into the future to evaluate the market’s current performance.  As noted previously, the current cycle lost more, and realized it faster than in the 2000 downturn. .Additionally, it recovered earlier.

compare-june-4-2010-with-2000-to-2007-cycle.gif

Despite this timing differential, however, the overall time paths of the two cycles, so far, share the same profile. Accordingly, if the profiles and lengths of these price cycles depend significantly on the time elapsed from the previous peaks, the diagram argues that the recent drops may not be signaling an early end to the trend of higher prices.

While an early bird does not mean spring is here, nevertheless the current price formations can be used to argue that these parallel declines signal pauses rather than an end to this cycle’s recovery phase. Obviously, this is an eye-ball analysis, not verified, either statistically or theoretically. Yet putting this qualification aside, it provides an insight to, and qualification of, current fears that severe structural changes demand a re-assessment of capital values.    DJIA                -3.15     percentNASDAQ        -3.64     percent

S&P500           -3.44     percent

June 3, 2010 — Gains Continue

Thursday, June 3rd, 2010

Prices moved higher for the second day in a row:  the NASDAQ gained  .96 percent, the S&P500 rose .41 percent and the DJIA was up  .06 percent. Yet except for the NASDAQ the other two indices remain below the levels of last Thursday.

Today’s pattern traces closes over the last four days; the last two finished higher, the previous two closed lower while prices on the session before that increased.  This action is summarized by the abbreviation +2/-2/+1.

 The record shows 29 such closes since 1950 with 16 crossing the tape after January 2000.The average gains of all three indices in that series, however, exceed today’s. Those NASDAQ advances ranged from .34 to more than 6 percent, with the mean of 1.67 percent, almost twice today’s.

If tomorrow follows past results for this pattern, expect the NASDAQ to decline since its next day performance was 13 losses and just 3 increases. The DJIA and the S&P500, moreover, provide no guidance since their record stands at 8 losses and 8 advances.

The projection for today came in on target, since advances on the ‘next day’ outnumbered declines.

A further point – most of the 16 previous repeats of today’s pattern happened while prices were on an upswing.   

DJIA                 .06     percent                                    NASDAQ         .96      percent                           S&P500             .41      percent 

June 2, 2010 — A Good Day

Wednesday, June 2nd, 2010

Yes prices achieved a robust gain, the first uptick in three days, yet they lagged the increases posted last Thursday.  Further, today’s levels of the DJIA and the S&P500 are below those, while the NASDAQ is just above last week’s.

Today’s pattern of  +1/-2/+1 is its 27th repeat since 2000 and the 55th overall. On the following day, prices continued their advance 18 times, falling on 9 days.  

Though the NASDAQ increased by 2.64 percent today, this gain merely ranks as the 206th largest. On the other hand, the S&P500’s plus 2.58 percent is its 151st in size. The DJIA increase of 2.25 percent comes in at position number 231.

 DJIA               2.25     percent 

NASDAQ       2.64      percent

S&P500           2.58     percent