Relatively minor changes in daily prices occur often, as in the past several sessions. Yet the lack of uniformity by the three indices in the direction of change deserves greater attention. Last Wednesday, the DJIA moved higher, whereas the NASDAQ and the S&P500 declined. On Thursday, the NASDAQ ended higher and the other indices declined. On Friday, while all three moved up, the NASDAQ again spoiled the unanimity count, rising for the second session while the other two averages posted their first. And today, the odd combination continued when the three indices moved higher.
These disparities undermine our pattern methodology’s ability to project the probabilities of future market projections: the small number of occurrences undermine their validity.
Instead, today’s post focuses on, and compares, the current price cycle of the S&P500 with that of the last, 2000-2007, decline and recovery. The figure displays their daily closing prices. At first, given the more rapid decline of 2007 and the earlier upturn that started in March 2009, it seemed that the current cycle would recover earlier, having lost value much faster, than the previous cycle.
But since April, when steep price depreciation cut into the earlier gains, the facts on the ground denied this view. Instead, considering recent price declines, more integrity goes to apprehensions that indeed, prices remain far from recovering, and that the next few months could see a further decline, as the market replays the earlier scenario.
Indeed, such interpretations deserve attention, as investors consider their portfolio options.