Archive for October, 2010

October 13, 2010 Positive Streak Continues

Wednesday, October 13th, 2010

 

As in yesterday’s blog, the focus remains on the four gains in a row by the DJIA and the S&P500 while the NASDAQ now has five straight advances. Only 11 such combination of increases have occurred since 1950, with just one in this century, on May 20, 2005.

 

Whereas yesterday’s projection strongly favored a further advance -that was realized today- the record of the next day came in less favorable. Yes, the odds for the NASDAQ come in at six gains against five losses, the other two indices show eight declines and three advances. Further, all three indices fell on the most recent experience, on May 20, 2005.

 

The diagram below plots the total four day advance against the S&P500 closing prices since January 2000. Surprisingly, the graph indicates that the larger four day gains correlate with declines in prices, and the opposite holds for the smaller four day totals. More on this in a later blog.

10-13-2010-sadj-and-pct-change-over-four-days.gif

 

DJIA                       .69 percent

NASDAQ                .96 percent

S&P500                .71 percent

 

 

October 12, 2010 Prices Up Now for Third and Fourth Days

Tuesday, October 12th, 2010

 

 

The NASDAQ positive run has now stretched to day four; the DJIA and the S&P500 similarly achieved their third straight increase. Only 18 other session since 1950 -and just one since January 2000- achieved this pattern. Moreover, on the days following such postings, further increases outpaced declines. The NASDAQ moved higher 15 times; the DJIA 13 times and the S&P500 achieved further increases on 11 occasions.

 

Considering the market’s performance since its April 2010 top, note that since the two most recent lows of September 9/13 and the one following on September 19/23, prices have continued their rise almost continuously, even though the upticks on most days were modest.

 

 

DJIA                                    .09 percent

NASDAQ                            .65 percent

S&P500                            .38 percent

 

 

 

October 7, 8, and 11 — Small Changes Continue

Monday, October 11th, 2010

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.

 compare-2000-and-2007-sp-cycles.gif

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.

 

October 14, 2010 Small Declines

Wednesday, October 6th, 2010

 

 

 

 

 

Although prices drifted down only slightly, that move stopped the latest streak at five straight advances for the NASDAQ and four positive days in a row for the DJIA and the S&P500. Therefore today’s pattern for the NASDAQ is -1/+5; it is -1/+4 for the other two averages. However, because only five previous days exist -and all occurred before 2000, their discussion provides little insight into the market structure. The batch is too small, and too old, to allow any meaningful insights.

 

Today’s commentary focuses on the record of sessions following streaks of four and five day increases. The NASDAQ’s, for example, posted 72 five day advances larger than yesterday’s 1.70; on the following day, the three indices had median declines of -.28 percent for the S&P500 and -.16 percent for the DJIA; the NASDAQ itself, however, gained .10 percent. These numbers cluster around today’s closes of -.36 percent for the S&P500; -.01 percent for the DJIA and the NASDAQ change of -.24 percent.

 

Similar rates, although positive, apply to the four day change rate of the S&P500; its 1.78 percent was bettered 475 times since January 2000. Further, yesterday’s DJIA four day rate, of 1.35 percent ranks as number 655 since 2000. Thus the proposal that yesterday and today display uncharacteristic behavior remains unpersuasive.

 

 

DJIA                           - .01 percent

NASDAQ                   - .24 percent

S&P500                    -.36 percent

 

 

 

October 5, 2010 Best Day in Seven

Tuesday, October 5th, 2010

 

 

 

The NASDAQ added 2.36 percent – the best performance since September 24. The S&P, not far behind, gained 2.09 percent while the DJIA rose 1.80 percent. Today’s market enjoyed the best performance since September 24, with the S&P500′s increase ranked the 303rd largest.

 

The current count of direction changes -the pattern- is +1/-1/+1/-2. Only 14 earkier closes exist since 1950, the last 11 happened since January 2000.

 

In the past, the following day continued positive six times but declined during the other five sessions.

 

 

DJIA                         1.80 percent

NASDAQ                 2.36 percent

S&P500                   2.09 percent

October 4, 2010 Another Decline

Tuesday, October 5th, 2010

Prices fell again, the third loss in five days, continuing the difficulty of deciding whether the April high indicated the top of the expansion, or the present up-then-down changes signal a pause, or values will retreat. Further, today’s pattern of -1/+1/-2/+1 adds further uncertainty.

 10-4-2010-1-1-2-1-8-repeats-dec-over-90.gif

 

The diagram marks the previous 8 days with this pattern. Five of these happened at or near the top, while the other three clearly did not accompany rising prices. Moreover, prices continued to fall five times on the following day. Indeed, once the declines exceeded – 5 percent.

 

 

 

DJIA                        – .72 percent

NASDAQ               - 1.11 percent

S&P500                  -.80 percent

October 1, 2010 Prices Reveal a Pattern, Returning to Last Friday’s Level

Saturday, October 2nd, 2010

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.

10-01-2010-pct-up-after-2-downs.gif

 

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