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