At midday each of the three indices sported gains above one percent; but then prices began to slump, and while the NASDAQ fell into negative territory, at the close, all indices moved fractionally higher. The NASDAQ managed to advance just +.10 percent a very modest change given that only 84 of the 1,375 positive days, since January 2000, posted smaller advances. The DJIA and the S&P500 did better, gaining .59 percent and .54 percent.
Increases on the following day, in the past, came to 193 whereas declines of all three indices occurred 175 times. While this difference is not substantial enough to merit a projection for tomorrow, tabulating the number of positive and negative sessions over the two bull and the two bear phases since 2000, reveals a set of ratios which support a favorable outlook.
Consider the action during the large decline of 2000/2003: of the 741 trading days, 40 of the changes on the following day advanced further, while 48 turned down. In terms of proportions, 5.4 percent of succeeding days moved higher whereas 6.5 percent declined. Looking at this in another way yields the ratio of positive to negative days of 83.1 percent. During the following 2003/2007 bull market, the number of gains on the next day amounted to 97 and the declines totaled 72. Accordingly, 8.4 percent of the 1,154 sessions closed with two gains in a row; while 6.2 percent declined. Thus the ratio of advancing to declining days is 135.5 percent.
The identical ratios for the following decline yield a proportion of 80.0 percent positive to negative; and so far in the current expansion, the ratio of the following positive to negative days is 125 percent.
Summarizing these data yield the following conclusion: in the past, on the day after a turnaround from falling to rising prices, gains were recorded about 80 percent of the time when prices trended down. During market advances, however, this ratio increased to over 125 percent.
Thus tomorrows outcome can provide some insight into the question: will the market, in the near future, advance further, or will it decline.
DJIA .59 percent
NASDAQ .10 percent
S&P500 .54 percent