Archive for July, 2010

July 15, 2010 Minute, Unusual Changes Mean What?

Thursday, July 15th, 2010


July 15, 2010  Minute, Unusual Changes Mean What?With the S&P500 gaining only  .12 percent and the NASDAQ easing  some  -.03 percent while the DJIA lost  -.07 percent, today becomes the third repeat of the  +1/-1/-1 pattern since 1950. Indeed the other two occurred way back, in 1972 and 1978. In addition, focusing on the negligible size of these change, reveals only four previous sessions in the same range.The span selected for the DJIA ranges from zero to  -.10 percent, the NASDAQ lies between zero and  -.05 percent and the S&P500 goes from zero to   +.15 percent.  Selecting only closes within these ranges and only when all three indices experienced these simultaneously, yielded one observation each in 1987, 1992, 2006, and 2010. That last one took place on March 3 of this year.

 one-07-15-2010two-other-closes-in-todays-range.GIF

The first diagram plots the S&P500 from mid-2003 to the present. The incidence of 2006 preceded a decline that reversed itself before the 2007 high.  The March case occurred immediately before the April top; the outcome of these recent days –whether prices will continue to recover or instead fall further – lies in the future.

two-07-15-2010two-other-closes-in-todays-range.GIF

Evidence of this criterion’s forecasting ability, however, diminishes considering the second diagram. Whereas the 1987 anticipates a significant drop, the second instance, happened immediately before the following boom.In summary, one way of treating these coincidences is to claim that three of the four mini-sized results projected declining prices. Yet a more cautious interpretation is to appreciate this mix as a possible early warning instead. Nevertheless, after the many optimistic projections based on similar reasoning, it is quite fitting to put these negative aspects on the front burner.  

DJIA              - .07  percent          NASDAQ      - .03  percent       S&P500           .12  percent

July 14, 2010 — S&P500′s Slight Decline Ends Streak

Wednesday, July 14th, 2010

 Losing just -.02 percent, the S&P500 closed lower for the first time since July 6.  In reality, the DJIA did not do much better; yet the plus .04 percent change let this index stay positive for the seventh day in a row.  The NASDAQ also continued positive, at up  .35 percent, thus raising its positive run to seven. Our record finds no other day with this combination of changes. Accordingly, a next day outlook becomes impossible.

Even assuming that the S&P500 closed higher, only four such closes exist, and since these, on the next day, are split evenly between advance and decline, history fails to provide a perspective for tomorrow.

 07142010-present-and-last-cycle.GIF

Though the recent gains have brought the market higher, prices remain substantially below their mid-April tops. Nevertheless, the comparison of the current recovery with the time path of the last, 2000/2007 cycle yields a promising outlook. While the earlier, steeper decline between 2007 and 2009, clearly was alarming, by this stage, 690 trading days into the cycle, values have climbed higher and earlier than the previous time.

That much can be said without contradiction; but projecting the future on the basis of a parallel between now and then, to yield a far stronger price, and possible faster, recovery requires evidence more substantial than now exists. It seems more essential to observe the near future. Will it continue to match the previous cycle then proceed with a comparable but higher price path?  Or instead, will prices descend first to that earlier trough thus delaying, or even stopping, the return to the 2007 highs? DJIA                         .04 percent

NASDAQ                 .35  percent

S&P500                 -.02  percent

July 13, 2010 Streak Extends to Six in a Row

Tuesday, July 13th, 2010

                                  CORRECTION 

 YESTERDAY’S BLOG SHOULD READ “…for five straight days…” 

Today’s large advances stretched the sequence to six successive gains for the DJIA, the NASDAQ and the SP500. While rare, the last occurrence was just weeks ago, on April 15.  Furthermore, only one other close, also recent in December of last year, made it this far since January 2000. The other 11 repeats go back to the 20th century, to the beginning of our data base in 1950.

The record reveals that expectations of a seventh straight daily advance by all three indices will not be realized: only four sessions achieved that goal, with non since the last occasion in 1990.

Yet the likelihood of a further advance by one or two of these three indices is larger. The NASDAQ has registered seven straight gains 18 times, and the DJIA achieved this goal 9 times, but the S&P500 reached it only twice. 

DJIA               1.44 percent      NASDAQ     1.99  percent     S&P500          1.54  percent 

July 12, 2010 Small Gains Lead to Sixth Up-day in a Row

Monday, July 12th, 2010


Today was only the 31st time that all three indices -the DJIA, the NASDAQ and the S&P500-  closed higher for six straight days. Furthermore, the count since January 2010 falls to just seven.  However, before celebrating this run, remember that the last  occurrence, in April,  preceded the steep correction of just three months ago, in April 2010.

Moreover, this positive run must end shortly: with a mere 31 repeats in the 15,200 sessions since 1950, this unusual run will come to an end. And indeed, in the past, prices fell on the following day four times out of seven.

On the other hand, apart from what will happen over the next few session, the longer term outlook, as described on Friday, continuous favorable.   

DJIA             .18  percent       NASDAQ        .09  percent         S&P500            .07  percent

July 9, 2010 Further Gains Close All Positive Holiday Week

Saturday, July 10th, 2010

Prices moving higher for the fourth day in a row repaired some of the damages of the recent five and seven day declines at the end of June. Moreover, this sequence of positive closes justifies feelings for a favorable outlook; that the deterioration of late is only a correction rather than an end to the recovery.

Four day rising price sprees for these indices are rare; today’s is only the 21st since 2000 and the 80th since 1950.

  7-09-price-changes-the-day-after-four-in-a-row.GIF

The  figure displays the specific days, and gains, of  the S&P500 on the previous 20 occasions when all three indices advanced four days in a row. With the vertical lines separating the bear and bull phases of the past ten years, they show quite clearly that these incidents accompany a trend of rising prices. Only three took place when values were falling. None were seen in the last, 2007/2009 decline. All the other 17 crossed the tape during the expansion of 2003/2007 or the current recovery.

That combination of outcomes justifies an optimistic outlook for the near term future. Yet the record reveals that the projection for Monday, the day following this surge, calls for declining prices. Note that the diagram plots these subsequent sessions, of the day after the four straight advances.

All three of the next day readings show falling prices during the 2000/2003 decline. The ratio of next day advances to declines, on the other hand, is split evenly between increases and decreases. With Monday’s results yet to be determined, note that of the seven occurrences of the current expansion, we know only six ‘next day’ results.

DJIA             .58  percent     NASDAQ        .97  percent      S&P500        .72  percent 

July 8, 2010 Third Successive Advance, Plus a Favorable Projection

Thursday, July 8th, 2010

Not roaring yet prices advanced again. So far, all of this week’s sessions moved higher. The gains for today are at  1.20 percent for the DJIA, and  .94 percent for the S&P500. The NASDAQ came in third, with only a  .74 percent increase.  

The record shows 217 previous days with these indices three days in a row; 57 of these occurred since January 2000.  However, the data reveal a not so good outlook for tomorrow: declines were more frequent than gains, except for the DJIA. It managed 33 increases and only 24 declines on the following day. The NASDAQ, on the other hand, scored only 26 gains, with 31 losing sessions. Similarly, the S&P500 shows 28 gains against 29 increases.

7-08-10-three-in-a-row-for-the-three-indices.GIF

But the longer term outlook comes in favorably despite this negative tilt for the next day. The diagram reveals that the great majority of these three in a row closes took place when the market was moving higher. Just counting the frequency during bear phases – 8 in the 2000/2003 years and 4 in 2007/2009 – reveals that three in a row for all three indices favors good times.

Nevertheless, we find that this characteristic does not carry over to the proportion of next day happenings. It would be a comforting signal if indeed the day following had a concentration of falling prices during market declines. The data instead indicate that the proportion of declines is quite similar, regardless of the trend of prices.

As a result, counting the incidents of next day changes does not yield a projection for tomorrow. On the other hand, they do provide a long term outlook: three straight increases by the three indices are associated with long run trends of rising prices. Therefore, these recent price developments indicate that higher, rather than, lower prices will mark the near future.

DJIA         1.20  percent      NASDAQ         .74  percent       S&P500           .94  percent

July 7, 2010 Best Day Since May 27

Wednesday, July 7th, 2010

Prices shot up by 3.13 percent for the NASDAQ and the S&P500; the DJIA gained 2.82 percent – closing with the largest increase in 27 trading days. Today’s S&P500 performance ranks as the 93rd largest in its history; the DADJ performance is its 116th best, while the NASADAQ gain stands at position 145 from the top.

The three averages now have put together two straight gains; the record shows 194 other two-day runs since January 2000.  The odds for a third positive close –for tomorrow- however are not promising. Whereas the NASDAQ has an even number of gains and losses, both the DJIA and the S&P500 both have a substantially larger number of losses than increases in the past.

Continuing our look at the record, consider only the recent, since 1990, sessions on which these three indices achieved larger movements than today’s.  There have been just 9 such sessions before today. With 3 happening during the 2000/2003 decline, and 4 in the course of the 2007/2009 bear market; a further negative implication for future price trends comes apparent.

Yet let’s not forget yesterday’s long term outlook; it indicates rosier prospects, based on the past performance pattern on the second positive day after turnarounds. Indeed, since the current session possesses this feature, the above projection of failing prices deserves a caveat – as equally needed by the outlook presented yesterday. 

DJIA                    2.82  percent

NASDAQ            3.13  percent

S&P500               3.13 percent

July 6, 2010 — Finally, Prices Move Higher

Tuesday, July 6th, 2010

 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 tomorrow’s 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 

July 2, 2010 Another Negative Session

Friday, July 2nd, 2010

The pre-holiday week ended today without closing once on a positive note. The NASDAQ and the S&P500 posted their fifth successive decline while the DJIA dropped for the sixth day in a row.Prices, however, fell only moderately; losses were limited to  -.47 percent.

In the past ten days, the value of the S&P500 dropped  -8.5 percent, as the index fell from 1117 to 1022. That percentage of decline ranks as the 59th largest since 2000 and stands in place 108 overall, since 1950.

 7-02-pct-change-over-10-days.GIF

We return again to the theme of where is this market going and consider the diagram. It plots the daily closing price of the S&P500 from just before the last top in October 2007 to today. The other line represents the percent changes from the close of ten days ago.  This presentation reveals that the recent rates of 10 day percentage change are declining, along the with the S&P500 price. Whereas these recent values remain far above those of registered before the final phase of the drop that ended in March 2009, the latest ones mirror the magnitudes just before, and during the early part of the October 2007 top.

Obviously, this interpretation is a judgment call. Readers may interpret these relationships in a different manner. However, in face of the many earlier analyses suggesting that prices will continue to move higher, these data represent the third call of caution and lower values in the future.  

DJIA                    -.47  percent

NASDAQ            -.46  percent

S&P500                -.47 percent 

July 1, 2010 — Prices Continue Down

Friday, July 2nd, 2010

With the DJIA continuing its daily decline for the sixth day in a row, and the NASDAQ and S&P500 now down for the fourth straight session, confirm the outlook of the pessimists and doubters. Indeed, only one other session, since 1950, has this pattern – but because that occurred on January 5, 2005, when no significant changes followed, it fails to allow a comparison, or a projection, for the 2010 future.

 07-2010-all-falll-four-days-in-a-row.GIF

  

Furthermore, looking at days on which all three averages registered four successive declines, no substantial evidence points to a soon-to-follow market downturn. Indeed, looking at the figure which highlights these days with a triangle, this combination happens just as the preceding decline ends and a turnaround begins.

Therefore the current down days fail to confirm, nor even indicate, that the current recovery is at an end.

7-01-sp-332-days-since-peak.GIF

 Finally, in comparing this cycle, now in its 332nd day since its October 2007 peak, with the sequence of the 2000/2003 decline, the far shorter decline, reaching its trough 355 days after its peak, stands out as the major difference between these declines.  In addition, eyeballing their time profiles, reveals quite a few similarities in their up and down movements even though there are not many parallels in timing. DJIA                    -.42  percent

NASDAQ            -37  percent

S&P500                -.32 percent