USMarketView

February 28, 2011                     Market Advance Continues

The DJIA and the S&P500 moved higher for the second day in a row. While the NASDAQ also closed higher –after being in the red most of the day, its gain was just .04 percent. The DJIA had a more robust day, gaining .79 percent; the S&P500 moved up  .56 percent.

Accordingly, their pattern at the close comes to s +2, whereas the NASDAQ count is  +3.  Only  8 other sessions since the beginning of 2000 have this pattern. The number for the entire record is 34.

The diagram plots the S&P500 over the past two cycles, and identifies the 8 positive days with a red X. While the evidence is not strong, note that these days occurred more often when prices were moving higher.

Further, all of the earlier incidents took place substantially before the market reached a turning point. Therefore, this pattern allows projecting further price increases before values top out.

AS for tomorrow, the past does not offer much support for another gain. The record reveals that the NASDAQ and the S&P500 had three times as many declines as advances; the DJIA notched an even number of gains and losses.

DJIA               .79 percent

NASDAQ       .04 percent

S&P500           .56 percent

February 25, 2011        Prices Recover Most of Tuesday’s Losses

The three indices closed the shortened trading week on a positive note: the NASDAQ up  1.58 percent for the day and the S&P500 ahead by 1.06 percent beat the DJIA’s .59 percent. Yet today’s rebounds are modest in terms of past

daily changes. While the S&P500’s performance ranks in the 90^th percentile of all changes since 1950, the DJIA and the NASDAQ came in at the 75^th percentile.

Note that the close realized the price projections, based on yesterday’s closing pattern; however, today’s pattern leans substantially towards another decline on Monday.

Evaluating the sharp price rebound, between January 31 and February 25, note that in those 14 trading days, the S&P500 rose 4.48 percent. This pace, while far from extraordinary, is in the 90^th percentile of all previous S&P500 advances. Furthermore, this index beat the DJIA and NASDAQ record: the DJIA  14 day advance of 4.20 percent and the mere 3.07 gain of the NASDAQ.

DJIA              - .31 percent

NASDAQ        .55 percent

S&P500          -.10 percent

February 24, 2011        NASDAQ Up But DJIA and S&P500 Down Again

The sharp correction of the past two days may have run its course: even though the DJIA and the S&P500 declined for the third straight session, their losses, only -.31 and -.10 percent, are modest. In addition, the .55 percent NASDAQ   gain ranks in the lower third of its 700 positive closes in the past ten years.

Today’s pattern of  -3 (negative closes) for the DJIA and the S&P500, with the +1 (positive close) for the NASDAQ, has occurred just 52 times since 1950. The last ten –since January 2000- were followed by eight positive closes and two decreases. S&P500, combined with the NASDAQ increasing again is small. That transpired just once since 2000. The likelihood of a NASDAQ decrease on Friday is greater, since there have been 38 all told, with two in the last ten years.

Furthermore, the possibility of a fourth straight loss for the DJIA and the

S&P500, combined with the NASDAQ increasing again is small. That

transpired just once since 2000. The likelihood of a NASDAQ decrease on

Friday is greater, since there have been 38 all told, with two in the last ten

years.

DJIA              - .31 percent

NASDAQ        .55 percent

S&P500          -.10 percent

February  22 and 23, 2011             Prices Drop to February 4th Level

Following Monday’s holiday, the market sliced prices so severely in two days, that they lost all that had been gained in the past 13 sessions. It seems quite proper to lay the cause squarely to the impending changes in the fundamentals caused by the unrest in the Middle East and its impact on oil supplies and prices.

Nevertheless, remember that last Friday all three indices moved up for the third day in a row. With the record showing prices increasing for a fourth straight day only 16 times over the past 12 years, expectations of a further, immediate  gain rested on less than solid evidence.

Furthermore, the size of the losses suffered over the past two days  -2.65 percent for the S&P500, happened on 68 other days since 2000. In addition, on the day after –that is, tomorrow- prices recovered almost as often as they fell. That ratio is 37 gains to 31 declines.

Finally, while many of these large two-day declines coincide with the 2000-2003 bear market, the current recovery, which started in March 2009, has experienced almost that same number.

DJIA              - .88 percent

NASDAQ      -1.21 percent

S&P500           -.61 percent

February 18, 2011                Positive Days Stretch to Three

On the last day of the week, the DJIA gained .59 percent, the S&P500 rose .19 percent while the NASDAQ lagged behind with a .08 percent advance. Now posting the 220^th session of three straight gains, and the 61^st since the beginning of 2000, the chances of lengthening the string to four in a row on Monday are just about even.

The S&P500 record shows an equal number -30- of gains and declines. The DJIA however, made it to four straight 36 times, whereas the NASDAQ shows only 27, experiencing 33 declines.

Since this rally started in September, the best showing has been the NASDAQ’s nine-day string, with the DJIA at eight and the S&P500 with six. This count almost equals that of longer duration between March 2009, the bottom of the decline, and last September. Then the NASDAQ had a 12 consecutive days run, but the other two indices fared no better than in the recent period.

With nearly 2,800 trading days since the start of 2000, and the total number of four in a row sequences ranging from 27 for the NASDAQ to 36 for the DJIA the repeats of a fourth day positive run obviously were very slim.

DJIA              .59 percent

NASDAQ      .08 percent

S&P500          .19 percent

A diverse record exists for the day following two straight advances by the DJIA, the NASDAQ and the S&P500.

Today’s is its 201^st repeat since January 2000 – meaning that  7.2 percent of all trading days have this pattern. Further, that ratio in the near 4,800 pre-2000 days is nearly the same at 6.9 percent.

On the day following, however, like today Friday, February 18, the pattern of each index differs. While the NASDAQ had 102 further advances and 98 declines, that falls to 93 for the S&P500 and 78 for the DJIA. Those ratios, of a further increase to a decline then descend from 1.04 for the NASDAQ, to .87 for the S&P500 and .64 for the DJIA.

DJIA              .75 percent

NASDAQ      .21 percent

S&P500          .31 percent

The DJIA scored its largest gain in over a week, rising  .50 percent; the NASDAQ and the S&P500, also had their best day since Friday. The NASDAQ gained .76 percent and the S&P500 rose .63 percent. Whereas the DJIA increase is the first after two losing days, the other two indices moved higher after yesterday’s decline.

We have seen this pattern just 16 times since the turn of the century. The diagram shows these closes. With the vertical lines marking the changes in the market’s direction, it seems that this configuration of closes favors good times.

Moreover, on the following day, price corrections were more frequent than advances. Yet with just 16 data points and the small differences between the number of up and down days –9 declines and 7 increases- these data fail to provide meaningful projections of tomorrow’s price changes.

Nevertheless, the diagram marks the following day declines in red, and the rising days with a blue X.

DJIA              .50 percent

NASDAQ      .76 percent

S&P500          .63 percent

The NASDAQ and the S&P500 declined today, after closing higher on the three previous sessions, while the DJIA fell for the second day in a row. This pattern has occurred 20 other times since 1950, eleven of those happened after January 2000.

Positive closes on the day following outnumbered declines, 8:3. However their occurrences are clustered during rising markets.

Today’s, for example, is the fourth such pattern since the market turned higher in March 2009. Three others came during the 2003/2007 bull market. Yet three happened during the 2007/2009 decline.

DJIA                   -.34   percent

NASDAQ           -.34   percent

S&P500              - .32   percent

The NASDAQ, on the second day after passing its 2007 high, continued higher by  .28 percent. The S&P500 added  .24 percent but the DJIA shaved  -.04 percent of its previous close.

This pattern, of three successive gains for the NASDAQ and the S&P500, is the 20^th repeat in the past 11 years.

Prices fell on the following day, in the past, almost twice as often as they increased.

DJIA                   -.04   percent

NASDAQ            .28   percent

S&P500                .24   percent

Investors might celebrate a quite hooray as the NADAQ closed just above its October 2007 price for the first time in 817 trading days. Yet these festivities would be tempered by the deepening variance between the upturn of the NASDAQ  and the other two indices. At today’s prices, the DJIA stands at 86.6 percent of its 2007 high; the S&P500 even deeper lag is 84.9 percent.

The diagram showing the NASDAQ recovery percentage reveals the increasing difference between that and the S&P500 recovery rate. Note that the NASDAQ was falling more rapidly than then the S&P500 back in 2007. Yet ever since, the NASDAQ upturn beat the S&P500. (That holds also for the DJIA; its close is 86.6 percent of the 2007 high.)

Further, this NASDAQ performance advantage has been increasing in recent weeks, since the market’s pace became stronger. Note how the green line is becoming steeper and it’s distance from the red line is becoming wider.

Thus, the question of the moment is ‘will this advantage become larger in the near term, or will the DJIA and the S&P500 retrieve their parity.’ Investors who get this answer right surely will be in position to maximize their portfolio performance.

DJIA                    .36   percent

NASDAQ            .68   percent

S&P500                .55   percent