The market closed higher on Friday after losses in the two previous sessions. The net result of the two positive and three negative days this week comes pretty close to ‘no change’ from the Friday before. The NASDAQ’s value today amounts to 99.5 percent of its close last week; the DJIA and the S&P500 did even better with today’s prices equal to 99.7 percent of last Friday’s values.
At the end of trading, the pattern of these three indices stands at -1/+2, a combination seen 155 times since 1950. Focusing on the last 66 of these since the start of 2000, yields meaningful insights. Consider the diagram; it plots the S&P500 as a line, and locates the -1/+2 days with a small red circle.
Since vertical lines separate the growth and decline periods, they help differentiate the market’s behavior in these segments. This pattern occurs more often during rising price trends their incidence during the declines falls short of the number
Furthermore, the ratio of these events when prices are falling and prices are rising is near constant. The set of the last two alternating periods -of 3.32 percent with growth and 2.25 percent during the earlier decline- yields a ratio of 1.48 (as many when prices are on the rise).
With the earlier set of 2.68 percent to 1.75 percent during the preceding bear phase, resulting in a 1.53 ratio, we see the near constancy of these proportions over the last ten years. This comparison therefore reveals what could be a fundamental of the financial world if this constancy continues in the future.
DJIA .39 percent
NASDAQ .09 percent
S&P500 .44 percent