March 23, 2011 Tenth Direction Change This Month
Prices moved higher, mostly offsetting yesterdays losses, as the seesaws of up and downs continues. Yet todays pattern of +1/-1/+3 is only the 12th repeat in the past 12 years. Furthermore, yesterdays projection, using the record of previous next day changes, failed to anticipate these gains.
Focusing on the recovery rates of these three indices, see the diagram below, we focus on the NASDAQs acceleration that started at the end of last August. Since then, it has increased from 75.2 percent of its 2007 high, to 101 percent on February 18. Since then the NASDAQ has backtracked to todays 96.2 percent.
At the same time, the DJIA and the S&P500 have narrowed their falling-behind the NASDAQ recapture rate. Today the DJIA, at 85.3 percent of its 2007 high, lags the NASDAQ by 10.9 percentage points. That is down from the -13.5 points when the NASDAQ reached its top on February 18.
The S&P500 recovery parallels the DJIA. It lagged the NASDAQ by 17.3 percentage points on February 18; today the difference is down to 13.3 percentage points.
However, over the longer period, since all three averages spurted higher last fall, the NASDAQ has improved substantially more than the other two. Back then, the NASDAQs recovery advantage over DJIA has grown from 4.5 percent to 10.9 percent today. The same result applies to the S&P500s recovery rate: it increased from -8.2 percent last year to -13.3 percent today.
Without further discussion of the inherent differences in price changes and profit potentials, note however, that during the decline from 2007 to 2009, the percentage declines of all three indices were identical.
DJIA .56 percent
NASDAQ .54 percent
S&P500 .29 percent