USMarketView

Garamond;mso-bidi-font-family:Garamond;color:black”>March 17, 2011                      First Up Day of the Week

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Garamond;mso-bidi-font-family:Garamond;color:black”>The market firmed up, after
three declines, posting gains of  1.39
percent for the DJIA and 1.34 percent for the S&P500. The NASDAQ has increased
also, but advanced only .73 percent. 
Nevertheless, values still lag Monday’s close, with the NASDAQ now worth
only  97.9 percent of its price at the
beginning of the week.

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Garamond;mso-bidi-font-family:Garamond;color:black”>Today’s pattern -an
increase after three consecutive declines- has occurred on 25 other days since
the beginning of 2000. However, in the past, on the day after, prices fell more
often –15 declines for the DJIA- than they rose -10 advances for the DJIA. The
S&P500 did slightly better with 14 losses while the NASDAQ fell 13 times,
increasing on 12 days.

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Garamond;mso-bidi-font-family:Garamond;color:black”>Another way to view today’s
performance is to recognize that the S&P500 increase of 1.34 percent ranks
as the 295^th largest since 2000.  

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Garamond;mso-bidi-font-family:Garamond;color:black”>Note that today’s market
results confirmed yesterday’s projection.

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Garamond;mso-bidi-font-family:Garamond;color:black”>DJIA                1.39
percent

Garamond;mso-bidi-font-family:Garamond;color:black”>NASDAQ         .73 percent

Garamond;mso-bidi-font-family:Garamond;color:black”>S&P500           1.34
percent

March 16, 2011

          U.S. Prices Fall Third Day –While Nikkei Jumps 5.68 Percent

American prices lost near two percent, experiencing their worst decline since the beginning of the nuke crisis. In contrast, in Japan, home of the ongoing disaster, the Nikkei index gained 5.68 percent. Overall, however, losses of security values in Japan exceed, by far, our declines. The differential profile of price changes seems logical: losses vary directly with the distance-impact level of catastrophe.

Nevertheless, three straight declines of these three indices, happen rarely. Today’s is just the 53^rd repeat in the near 2,800 sessions since January 2000. They are distributed almost equally between eras of rising and falling prices. Yet the two declines had 2.02 and 2.25 percent of these three-day negative runs; while they amounted to 1.82 percent in the 2007/2009 decline and 1.57 percent of all closes since this recovery started in March 2009.

These numbers are too closes, and the differences too small, to conclude that three declines in a row by the three indices denote an early warning of future price declines.

On the following day, in the past, gains outnumbered losses by a ratio of 30:22.

DJIA                -2.04 percent

NASDAQ        -1.89 percent

S&P500            -1.95 percent

March 15, 2011                 Prices Off Some-Far Less than Japan’s -11 Percent

On the second trading day after Japan’s nuke disaster, American stocks declined more than a full percent. Not a good day – yet the losses are significantly smaller than overseas. Japan’s market lost 11 percent today, on top of Monday’s    -6.2 percent drop.  These rates make the NASDAQ decline of -1.25 percent seem moderate.

Yet this difference in losses need not indicate indifference to overseas tragedy. While our reaction clearly is milder, these price changes nevertheless are almost identical to the setbacks experienced after the Three Mile Island misfortune. The S&P500 fell -.35 percent on March 28, 1979; -.02 percent the next day, then -.43 percent and – .68 percent on the fourth day after.

Seven years later, the American financial market’s response to the Chernobyl meltdown again generated similarly mild price declines. That happened also over the weekend. On the Monday following, the S&P500 lost a mere  -.33 percent.  The drop became steeper on the following day as the S&P500 fell -1.1 percent, and by  2.1 percent on Wednesday. What is more on Thursday, as the calamity worsened, the S&P500 reacted with just a -.15 percent loss.

Consequently, a straightforward analysis of today’s pattern may yield a better projection of tomorrow’s prices. In the past, the day following two declines resulted in an even distribution between a further, third decline and a price recovery.

DJIA                -1.15 percent

NASDAQ        -1.25 percent

S&P500            -1.12 percent

March 14, 2011                 Limited Declines Follow Japan’s Disaster

Prices moved lower all day, yet at the final bell losses were less than a full percentage point. The S&P500 felt the biggest hit of  -.60 percent, while the NASDAQ  lost  -.54 percent. The DJIA fall off was  -.43 percent.  Moreover, today’s pattern of a loss, after a gain, which followed two losses in a row, is far from rare, with 27 repeats since 2010.

The diagram below, identifying these 27 days is revealing; it shows that this pattern is a characteristic of prices trending higher. Just seven of these incidents crossed the tape during the 2000/2003 and the 2007/2009 bear market. All the other incidents -20 out of 27- arose in the 2003/2007 and the current expansion.

It is not surprising that prices fell, given the catastrophic news from Japan. Yet, at least so far, the market’s reaction of limited price declines to the worsening spread of damage and personal tragedy implies significant strength of, and confidence in, the world’s business situation.

P. S. Back from the flu, its effects seem more reasonable now than when I was under its command, and numbers and thoughts failed to register in my mind.

DJIA                -.43 percent

NASDAQ        -.59 percent

S&P500           -.60 percent

Will resume publication March 14.

March 4, 2011                  Correction or Alteration?

It should not be surprising for prices to move in the opposite direction the day following a large change in prices. Typically, the word ‘correction’ designates   this relationship.  In that sense, today’s declines ranging from -.50 to  -.74 percent seem appropriate, as buyers and sellers interact to set a new equilibrium.

Yet the recent pattern of daily price changes –the repetition of down after two gains- repeated twice in succession happened only six times in our data base going back to 1950. Moreover, all six of these recurrences happened since 2004.

The graph identifies these with a red mark. Significantly, the last four came during the long price decline of 2007 to 2009.  Granted that prices were in a long recovery when the other two instances happened, nevertheless, investors might be duty bound to wonder if this signals a change in market direction.

DJIA                -.72 percent

NASDAQ        -.50 percent

S&P500           -.74  percent

March 3, 2011                 Largest Gain in Months

Prices soared at the opening bell and stayed near that high all day. The DJIA advanced  1.59 percent posting the biggest one-day advance since last November 18. The S&P500 increased 1.72 percent on the day, its best increase since December 1. The NASDAQ closed 1.84 percent higher than yesterday; that was its largest increase since the beginning of February.

Today’s closing pattern of  +2/-1 for the three indices has come across the tape 86 previous trading days since the beginning of 2000. However, in the past, the there was a more or less even distribution on the following day.

The diagram differentiates the four up and down phases of the S&P500 since the start of 2000. The red markers denoting losses and the black pluses gains, no apparent configuration is possible except the same number of gains and losses regardless of the market’s up and down trends.

Yet there is one exception: the current upturn so far has 9  advances but only 3 declines.

DJIA                1.59 percent

NASDAQ       1.84  percent

S&P500           1.72 percent

March 2, 2011                 Market Changes Direction Again

Though all the three indices turned up today, these gains left prices in yesterday’s range. The NASDAQ posted the largest increase, a plus .39 percent; the S&P500’s move was .16 percent while the DJIA managed just .07 percent.

The record shows 424 days with this   +1/-1   pattern. The last 200 occurring since January 2000. Moreover, and oddly, the following day saw an almost equal number of advances aand declines. The S&P500 scored 99 positive subsequent days; on the other extreme, the NASDAQ had 105 increases on the next day.

These plusses and minuses, however, were not spread evenly across the three averages. Only 86 sessions, of the 200 in the past decade, showed gains for all three indices. There were 81 days when all three declined.

DJIA                .07 percent

NASDAQ        .39 percent

S&P500            .16 percent