Prices, up most of the day, maintained their gains as the DJIA, the NASDAQ and the S&P500 each posted their first positive gain. Both the DJIA and the NASDAQ came back from two successive declines, while the S&P500 moved higher after Fridays decline. Accordingly, with the S&P500 closing pattern of +1/-1 and the other two averages at +1/-2, todays post focuses on the characteristics of each index in the past.
First, such patterns occurred 446 times since January 2000. Second, none of these happened on days when the previous close was one down for the S&P500 and two down for the DJIA and the NASDAQ.More importantly, for the purpose of attempting to understand how prices could move in the future, consider this relationship with respect to past market declines and expansions.
Classifying these 400 some closes, as shown in todays table, reveals a greater proportion of advances, on the following day, when the trend of prices is up.
In the first expansion, 47.5 percent of next day closes showed another increase for these three indices. The second, current growth period has 44.1 percent all three indices gaining on the next day.
This record stands in sharp contrast to this same measure during periods of falling prices. These ratios are 37.8 and 38.4 percent. Of course, remember that the current period or current expansion covers the phase right now. Thus, these tendencies enable a peek at the future; if this proportion remains at present levels, it can be used as justification for projecting further gains. Or, on the other hand, if the ratio of positive next day closes falls, it can be taken to anticipate a future decline of the market. DJIA .56 percent NASDAQ .88 percent S&P500 .60 percent