Prices fell for the second successive day, breaking the see-saw sequence up-then-down of the previous four sessions. The resulting pattern of -2/+1/-1/+1 shows no significant relationship with trends in long term growth or decline.
On the following day, the record shows increases exceed decreases : since January 2000, all three indices rose on 66 days and fell 50 times.
DJIA – .44 percent
NASDAQ - .33 percent
S&P500 – .31 percent
For the fourth successive day, prices changed in the opposite direction from the day before. We have considered the connection between these roller-coaster sequences and the trend of prices. So far, no significant relationship is apparent. The history does show they have increased, and occur more frequently in the period since 2000 than before.
Today’s pattern of -1/+1/-1/+1 has occurred 53 times before, but only 34 of these happened since January 2000. Should today’s closes reveal another reversal in direction, it would be the 22nd sequence of five successive changes in a row. Most of these, 19 in fact, crossed the tape since 2000.
For the record, considering the frequency of six day chains, their total comes to 9 and 8 of these belong to the later, post 2000 period.
DJIA - .21 percent
NASDAQ – .13 percent
S&P500 - .26 percent
Almost mirror images of Monday’s negative changes, enabled today’s gains to bring these averages almost to Friday’s levels. Summarizing this see-saw of up/downs with the pattern notation of +1/-1/+1 allows the following comparison of this history.
We look at the 79 instances of these swings since January 2000, and note first that their frequency has increased in recent years: just 56 repeats took place in the 1950 to 1999 period.
Furthermore, during the 355 trading days between 2007 and 2009, the market saw this pattern account for 4.5 percent of all trading days. This period covers the price decline between the October 2007 top and its bottom in March 2009. To see if bear and bull spirits coincide with these three day see-saws, we compared their frequency over the two complete cycles since the March 2000 bottom.
The results, pictured in today’s diagram of just these three day episodes, do not support that contention. Whereas the 18 repeats of the 740 day decline result in a 2.43 percent frequency, and the 33 incidents over the following recovery represent a larger 2.86 percent proportion, the following cycle’s count shows the relationship to be opposite. The 2007 decline had 4.51 percent of its trading days showing this three-day sequence whereas the upturn since the 2009 low, so far, has a smaller ratio of 3.08 percent.
Consequently, the data do not support a relationship between up-and-down repeats and price changes. However, they are consistent with the contention that instability of price trends has a historical uptrend; that price volatility has increased in recent time.
DJIA .43 percent
NASDAQ .41 percent
S&P500 .49 percent
Down most of the day, at the close the S&P500 lost -.57 percent, the NASDAQ fell -.48 percent and the DJIA was off -.44 percent. While intuition might see such downgrades as not unusual after a rally as strong as Friday’s, the pattern of the past five trading days indicates caution ahead.
Daily changes going back to Monday of last week, summarized as -1/+1/-3, followed a pattern recorded only twice since 1950, the beginning of our data base. The figure identifies these incidents plus today’s close with vertical lines on the S&P500 closing prices.
Both of these earlier happenings preceded substantial rallies, which were followed, however by large declines. The recent January to April run-up, for example, suffered substantial declines, which still leave today’s values below that high.
Looking at the only other experience of -1/+1/-3, in 2002, reveals an even more telling case. A large, further bear market materialized thereafter, and prices continued their decline to March 2003 before values hit bottom.
DJIA - .44 percent
NASDAQ - .48 percent
S&P500 - .57 percent
In the best daily performance since September 1, the NASDAQ added 2.33 percent, the S&P500 rose 2.12 percent while the DJIA closed with just a 1.86 percent increase. In terms of ranking daily advances, the S&P500 led, with today’s change its 133rd largest since January 2000. Though the DJIA trailed the NASDAQ action, it nevertheless ranked 152 from the top above the NASDAQ’s 206th best performance in the past decade.
These changes yield a pattern of +1/-3 for the NASDAQ and the S&P500; the DJIA closed down only twice in a row -on Wednesday and Thursday- ended the week with +1/-2 sequence. Only 7 other days since 1950 share this characteristic, with the last four happening since January 2000.
The diagram of the S&P500 closes since 1985, locates these with solid circles. Their distribution over the ups and downs of the past 25 years provides little help in ascertaining the future of the present market. Whereas the first three, in 1986 and 1994, shared rising prices, two others preceded the October 2007 peak. The last, previous experience this past January, notwithstanding the run-up that ended in April, fails to provide much insight about price trends in the near future.
DJIA 1.86 percent
NASDAQ 2.33 percent
S&P500 2.12 percent
Its the third straight declines for the NASDAQ and the S&P500 -but only the second for the DJIA- but does it spell the end, or even reversal, of the recent rally? So far the NASDAQ has dropped 1.2 percent in three days; yet that comes to only a small proportion of its 15.6 percent gain at the end of the nine day run of positive closes. Similarly, the DJIA is off just .8 percent from Monday. The S&P500 displays the worst symptom, losing 1.6 percent from its recent high.
Today’s pattern -three consecutive declines paired with the DJIA’s twin losses- comes as the 21st repeat since 1950, but only the 7th in this decade. The average decline of these last six repeats: –2.8 percent for the NASDAQ, -1.7 percent for the S&P500 and -1.5 percent for the DJIA, is substantially larger than today.
Moreover gains outnumber declines on the following day. Indeed the S&P500 recovered on each of the last seven repeats of this pattern, and recorded 13 advances to 7 losses since 1950. The NASDAQ has the same number of declines and gains overall, but 6 consecutive increases since January 2000. The DJIA also had more positive closes in this century but managed only to break even in the 1950-1999 period.
DJIA – .72 percent
NASDAQ - .32 percent
S&P500 - .83 percent
Finally, after nine straight positive closes, the NASDAQ closed lower. But that loss is far from an indication of a downshift in prices. As discussed in yesterday’s analysis, rationally, the odds of a decline were infinitely larger than the probalility of a further gain.
Furthermore, the NASDAQ decline was just -.28 percent, a number small enough not to raise the eyebrows of experienced followers of asset prices. The S&P500 lost -.26 percent, and continued its up and down price see-saw. Similarly, the .07 percent gain by the DJIA -the fifth advance in a row- deserves similar skepticism. All in all the day’s changes seem too small to imply change in the direction of prices.
The record shows 11 previous closes with today’s pattern and three happening since January 2000. While the following day had six declines, none took place after 1997. All of the next day closes were positive thereafter. Note that three of these took place within the past twelve months.
DJIA .07 percent
NASDAQ -.28 percent
S&P500 -.26 percentt
Focusing on the NASDAQ’s positive streak, as it closed higher for the 8th straight session, reveals a rosy outlook. Runs this long have occurred just 76 times since its listing in 1970; furthermore, today is only the NASDAQ’s fourth eight-day string since January 2000. (If you are looking at Monday, the next trading day, note that this index went on to 9 advances twice in this century. More on this aspect later.)
The diagram shows the NASDAQ with today’s and the three earlier streaks identified by vertical lines. On eyeballing the price curve immediately after these runs, we see further appreciation in the following days. These increases tend to continue without offsetting major corrections.
As for the day following, 45 streaks since 1950 went on to close higher, advancing for a 9th day; the last two happenings came in July 2009 and this past March; but the earlier 2005 run ended at number eight.
Yet with the market still far below April’s high, the uncertainty continues. And while the recent upswing has recovered lost values, the current uptick – the fourth in the last four months – still leaves prices nowhere near that April high.
DJIA .12 percent
NASDAQ .54 percent
S&P500 .08 percent
Prices remained almost unchanged from the day before, the NASDAQ’s string of consecutive gains notwithstanding. It moved higher by just .08 percent. While the DJIA rose .21 percent, the S&P500 lost -.04 percent. In fact, the lack of direction of security prices since dropping from their recent mid April high continues. The diagram illustrates that the market’s stability, even though some substantial daily changes occurred.
But rather than unusual, small changes dominate the daily price action. In fact The average of all daily changes of the S&P500 comes to zero since January 2000. The NASDAQ has the identical zero mean, while the DJIA’s daily mean is just .01 percent.
In fact, today’s closing prices remain below their January 2000 levels of 1455 for the S&P500, 11,357 for the DJIA, and the NASDAQ’s 4131.
Nevertheless, the intuitive feeling of significant daily price changes is confirmed by the median of the market’s movements. These stand at .04 percent for the DJIA, .05 percent for the S&P500,
and .06 percent for the NASDAQ. Thus, even though the average of all changes come to zero, the actual number of daily changes cluster around these smaller, yet positive levels.
DJIA .21 percent
NASDAQ .08 percent
S&P500 – .04 percent
The NASDAQ just keeps rolling along and today the DJIA and the S&P500 joinrd the plus column. This yields a pattern +6 for the NASDAQ and +1/-1 for the other two averages.
Three other days in the past share this configuration and all occurred at, or preceded the trough of the last three price cycles!
Wouldn’t it be great for the bulls, optimists, and asset holders if this were to repeat in the near future.
DJIA .44 percent
NASDAQ .50 percent
S&P500 .35 percent
