May 11, 2011 Does Todays Pattern Signal Up or Down?
Yesterday we suggested that the third straight uptick for these three indices signals continuation of the current trend of rising prices. The basis of that projection is that three gains in a row occur far more often when prices are rising.
Now, after prices declined today, this same technique, oddly enough also projects further gains ahead. This seemingly contradictory forecast results from using the relative number of these events, whereas yesterdays analysis counted the total frequency in each of the two expansions and contractions since 2000.
The diagram displays these percentages; they show that the pattern rises, and is much larger, when the trend of prices is up, confirming what appear to be contrary and opposite projections from near identical data.
However, another aspect these two diagrams share is their cluster before, and near, the two upper turning points. Consequently, the placement of this pattern suggests a nearly immediate end to the bull market whereas the proportion of their appearance suggests a further extension of higher prices in the future.
DJIA -1.02 percent
NASDAQ -.93 percent
S&P500 -1.11 percent
