USMarketView

April 29, 2011                   April Best Daily Performance of Year

The average daily change of the S&P500 this month comes to .14 percent, compared to March’s .08 percent and January’s .10 percent. It is near seven times larger than February’s  .02 percent. The DJIA and the NASDAQ closed April with similar advantages over the earlier months.

This good news is in addition to the NASDAQ’s run of positive closes, now for the eighth consecutive day. There are just four runs –of 8 NASDAQ, 4 DJIA and 4 S&P500- in the entire history of this index. Furthermore, the last happening was in 1999, with the other three going back to 1990, 1986 and 1971.

Considering the NASDAQ performance alone, the record shows 80 sessions of eight-day runs, with 20 in this century. Looking at this coming Monday, the NASDAQ has experienced 46 nine-day runs, with only 11 since the end of 1999.

Monday’s DJIA and the S&P500 expectations are not as bright: not a single close exists with the DJIA and S&P500 up five straight days while the NASDAQ achieves nine consecutive up-ticks. 

DJIA               .37 percent

NASDAQ       .04 percent

S&P500          .23 percent

April 28, 2011                      Seventh Gain in a Row for NASDAQ

The good news from the NASDAQ continues.  Today, as the headline reports, the index extended its streak of positive closes to seven, a record repeated on only 17 other days in the past ten years. The DJIA and the S&P500 both moved up for the third successive session since 2000.

That combination –up seven for the NASDAQ and three for the DJIA and the S&P500- is a first for this century, although it happened on 8 occasions before the new decade started. 

The good news offered by the NASDAQ’s seven uninterrupted daily increases results from the timing of these advance. With the diagram marking these closes with a solid red dot, it is easy to recognize that these came about only when prices were moving higher. 

Furthermore, while this history substantiates the feeling that the current market’s rise is far from over, it reveals also that in the past NASDAQ’s prices rose twice as often on the next day as they declined. However, the projection that the DJIA and the S&P500 will move up likewise, for a fourth day in a row, generates less confidence. This result, up 8 days for NASDAQ and 4 days for the DJIA and the S&P500, occurred just once before, in July 2009.

DJIA               .57 percent

NASDAQ       .09 percent

S&P500          .36 percent

April 27, 2011                      NASDAQ Breaks Through 2007 Top

Ending today’s trading at 2869.88; the NASDAQ finally broke through its last, October 2007 high of 2859.12.  True, that’s not much growth but after nearly 900 trading days below its last high, it marks a new period.  Regrettably, the DJIA has attained just 89.6 percent of its previous high, and the S&P500 is even further behind, recovering only 86.6 percent.

Today’s pattern of six straight NASDASQ advances and two consecutive gains by the DJIA and the S&P500 presents a unique situation: it is a first since 1999! Before then, it occurred 22 times between 1971 and 1999. For that reason, tomorrow’s projection reflects this earlier period.

The outlook for the NASDAQ is very favorable, with 15 days of a further, consecutive advance; the S&P500 history shows a near equality of 12 gains and 10 losses, while the DADJ had an even number of further increases and declines.

DJIA               .76 percent

NASDAQ       .78 percent

S&P500          .62 percent

April 26, 2011                       Fifth Straight Gain for NASDAQ

The NASDAQ advanced  .93 percent to close at 2847.54, the second highest value since its last peak in 2007. Whereas it moved higher without pause since April 18, the DJIA and the S&P500 wobbled a bit, increasing today after yesterday’s decline. Consequently the pattern at the end of the day is plus 5 for the NASDAQ and plus 1 for the DJIA and the S&P500. 

This combination occurred just twice since the beginning of 2000, both incidents in 2000 – June 21 and August 17- just after the market hit its top in March.

Therefore, the current outlook is two faced. The strong recovery of the NASDAQ, now just a few points below its 2007 peak, indicates higher prices as the rally continues. Yet, with today’s pattern repeated just twice in the last 11 years, and both times happening just as the market was entering a three-year decline, suggests that prices may decline.

Thus the record poses a puzzle: will the NASDAQ’s continuing rise, now a mere 12 points below the 2007 high, continue into higher prices, or will prices trend down, just as before, given the repetition of the pattern last occurred as prices were heading down.

DJIA               .93 percent

NASDAQ       .80 percent

S&P500          .90 percent

April 21, 2011                   NASDAQ Closes at 2007 Top

For the fourth time this year, the NASDAQ surpassed its 2007 highpoint. Yet, just as the three earlier days in February, today’s price is just marginally higher. However, both the DJIA and the S&P500 are further behind the NASDAQ pace than in February.

The market has advanced now for three days in a row, replaying a sequence observed   223 times since 1950. Of those, 64 happened since the beginning of 2000.  Most of these recent runs came while prices were rising, during the 2003 and 2009 recoveries. Nevertheless, during the turbulent 1970’s, when the economy suffered the impacts of the oil embargo and a sharp surge in oil prices, stocks often registered this three gains in a row pattern.

Consequently, with the current escalation of oil prices, it is advisable to remember that scenario and the resulting decline in asset values.

The fact that the DJIA and the S&P500 continue to trail the NASDAQ recovery suggests that these indices could enjoy substantial gains. Markets, in general, level individual variations and tend to restore the price relationships that existed in the past.

Turning to tomorrow, in the past the DJIA managed a fourth straight gain at a near 60 percent rate. The NASDAQ ratio is smaller but still 55 percent positive. The S&P500, however, lagged behind showing more losses than advances.

DJIA                .42 percent

NASDAQ        .63 percent

S&P500           .53 percent

April 20, 2011                              Best Day Follows Worst Day

Today’s gains, the largest since March 21, follow Monday’s worst day since March 16. With just two days separating these happenings, this down then up should lead to caution, not celebration. A market this volatile requires caution, not celebration. There is no need to look at the records to justify restraint; it should require nothing more than understanding that overreactions in one direction generate an opposite comeback.

Examining the week so far reveals that today’s and yesterday’s advances, following Monday’s decline yields a pattern of  +2/-1.  Some 194 previous closes since 1950 share this profile, with 87 of these coming after 1999.

Separating these for the two bull markets and the two recoveries, note that 29 occurred when prices were falling while 58 accompanied rising prices. Oddly, daily increases during the bear phases beat the gains in the recoveries – not by a small amount but by a factor of two.

During the 2000/2003 decline, for example, the average S&P500 gain for the 15  +2/-1 days was 1.37 percent – but the following recovery, which had 45 of this pattern, the average daily advance came to just .61 percent.

Turning to the following day, in the past the number of increases just about equaled the number of declines. Further, the frequency of these positive and negative next-days did not vary over the two bull and two bear markets. In other words, the percentage of rising and falling next-days was not different over these four periods.

DJIA               1.52 percent

NASDAQ       2.10 percent

S&P500          1.35 percent

April 19, 2011                              Prices Recover

The DJIA and the S&P500 managed to recoup near half of Monday’s losses, but the NASDAQ, while also moving higher, regained only a third of its loss. The pattern of the day fails to provide a useful outlook for tomorrow: either there are too many repeats -1,183 in all- of the three indices moving up for one day, or all three indices falling the day before or there are too few. Only three other closes since 1950 have today’s pattern.

While the slowing of the market’s advances is far from welcome, note the far more rapid recapture of this price cycle than the previous, 2000-2007 sequence. Further, even the recent pause has failed –so far- to wipe out this advantage.

A thought concerning the near universal attribution of yesterday’s losses to the credit mark down of our Treasury’s debt. Surely, the ability to redeem in cash, without losing value, underlies the value of all assets. And yes, the magnitude of the national debt and its financing has become a major concern.  Yet the market’s response of just a little more than a one percent loss seems a most modest reaction to such a world-shaking catastrophe.  

DJIA                .57 percent

NASDAQ        .35 percent

S&P500           .57 percent

April 18, 2011                  Steepest Decline Since March 16

           Prices dropped more than two percent at the opening bell and then came back. However, at the end of the day, the DJIA                  lost -1.14 percent, the S&P500  -1.10 percent and the NASDAQ closed down -1.06 percent. It was the worst performance

           in 23 trading days.

          Adding today’s pattern to Friday’s –three straight gains for the DJIA and the S&P500 but only one up day for the NASDAQ generates a combination seen on only 13 previous occasions, with just four since the beginning of 2000. A further unusual feature is that these last four losses ranged from  -1.34 percent to near minus 6 percent, whereas the earlier declines stayed above minus one percent.

         The past offers no clear signal for tomorrow. Whereas the NASDAQ suffered three declines and one increase, the other two indices had the opposite experience: three gains and one decline.

         Note that Friday’s projection for today, based on the record, was strongly negative for both the DJIA and the S&P500; but the NASDAQ record showed twice as many advances as declines.

DJIA              -1.14 percent

NASDAQ      -1.06 percent

S&P500          -1.10 percent

April 15, 2011                  Another Down Week

The several days of minor increases failed to offset the small decreases leaving the market lower on Friday than on Monday for the second week in a row. Today’s pattern of 3 straight gains for the DJIA and the S&P500, combined with the NASDAQ’s uptick, has occurred on 15 days since the end of 1999.

These were distributed just about evenly between rising and falling markets. Yet each index had a different record on the following day. The NASDAQ had 10 increases and 5 decreases. The S&P500’s count of changes was exactly the same, but in the opposite direction. It has 10 declines and only 5 increases. The DJIA’s history is close to the S&P500’s, with 6 gains and 9 losses.

DJIA               .46 percent

NASDAQ       .16 percent

S&P500          .39 percent