Archive for May, 2011

May 16, 2011 Prices Fall Again

Monday, May 16th, 2011

May 16, 2011               Prices Fall Again

 

 

 

Uncertainty about the debt ceiling renewal, and that the government might tap money that belongs to its employees’ retirement fund, cannot but damage confidence. Regardless of the right or wrong of running a country perpetually in the red, the threat of a stalemate between the House of Representatives and the President is sure to reduce confidence and hold back increases in equity values.

 

 

Closing down for the second day in a row, the NASDAQ was the leader, losing -1.63 percent – whereas the S&P500 fell -.62 percent and the DJIA gave back just  -.38 percent. The bad news is that the market has regressed some 17 trading days, with prices returning to their mid-April level.

 

There have been 28 closes in this century   with the same   pattern of          -2/+1/-1. These seem to be distributed equally over the up and down phases of the last two price cycles, with just about the same frequency in the up segment as the down period.  But, while their incidence is unrelated to price cycles, note that six have taken place in the short period since this recovery started in March 2009. In contrast, there were only ten during the more than 700 days of the 2003/2007 expansion.

 

Friday’s projection of today’s price changes clearly is inaccurate; based on past repeats of that day’s pattern, it expected gains rather than losses. While the call for tomorrow is also positive, but with substantially smaller odds of 4:3.

 

 

 

DJIA              - .38 percent

NASDAQ      -1.63 percent

S&P500         -  .62 percent

May 13, 2011 See-Saw Continues

Saturday, May 14th, 2011

May 13, 2011               See-Saw Continues

 

 

The market reversed direction again, for the fourth day in a row. At the end of the week, prices ended lower than last Friday. The pattern of closes now stands at   -1/+1/-1/+3, a combination seen only 8 times before. All except two occurred since 2002.

 

         Today’s diagram of the S&P500 identifies these with a red diamond. (You may count only five because the two instances in 2005, within days of each other, are on top of each other.) They do not provide sufficient information, however, to associate this pattern with an upturn or a decline in the near future. Whereas the 2002  and the 2009 incidents occur as prices bottom before they move higher, another happened in 2007 just before the market experienced a major decline.

 

         Given these cases of opposing outcomes, it is not possible to project the future trend of prices. Yet these past changes yield a strong forecast for price increases for Monday. On the following day, the S&P500 price always moved higher, while the DJIA and the NASDAQ gained ground on five the following six days.

 

 

 

DJIA              - .79 percent

NASDAQ      -1.21 percent

S&P500         -  .81 percent

 

three-up-and-downd-after-three-gains.gif

May 12, 2011 Third Direction Change This Week

Thursday, May 12th, 2011

May 12, 2011               Third Direction Change This Week

 

Prices advanced today after declining on Wednesday. This down-and-up cluster followed Monday and Tuesday’s gains. The result of this fluctuation leaves prices just a little ahead of Monday’s close. The pattern of one day up and the following day down, has repeated 202 times since the end of 1999.

 

The pattern going back to Tuesday, two days ago, is +1/-1/+3, a much rarer combination, occurring on 23 closes overall; of these, just 13 came in this century.  

 

Considering tomorrow’s market movement based on the record of today’s and Wednesday changes over the last 12 years, the odds are just about even for another increase and a decline.

 

However, adding Monday’s history to the projection platform, the chances of a declines and another price turnaround on Friday are 8:5 for the DJIA and the S&P500. The NASDAQ price change, however, has almost the same likelihood for advance as for decline.

 

DJIA               .52 percent

NASDAQ        .63 percent

S&P500           .49 percent

May 11, 2011 Does Today’s Pattern Signal Up or Down?

Wednesday, May 11th, 2011

May 11, 2011               Does Today’s 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 yesterday’s 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

 

one-down-after-all-three-up-3.gif

May 11, 2011 Does Today’s Pattern Signal Up or Down?

Wednesday, May 11th, 2011

May 11, 2011               Does Today’s 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 yesterday’s 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

 

 one-down-after-all-three-up-3.gif

May 10, 2011 Another Three in a Row for Three Indices

Tuesday, May 10th, 2011

May 10, 2011                 Another Three in a Row for Three Indices

 

The beat goes on! Or are we jumping to an unjustified conclusion just because in the past prices were moving on an upward trend almost every time the DJIA, the NASDAQ and the S&P500 moved up in three consecutive sessions. A red mark identifies these ‘three for three’ days on the diagram. Indeed, since its last occurrence, on April 21, just 14 trading days ago, the NASDAQ gained near two percent and the S&P500 rose 1.5 percent.

 

The scattering of the ‘three for three’ closes when prices are on the move concentrate


With the prices of these three indices rising for the second session in a row, consider the characteristics of today’s pattern. The record shows 206 repeats over the past 12 years – these amount to 7 1/4 percent of the more than 2,800 trading days since December 2000.

 

Now, consider only those two-day pairs with gains equal to, or less than, today’s changes of  .36 percent for the DJIA, .55 percent for the NASDAQ, and .45 percent for the S&P500. The total number then reduces to just 21 previous pairs.

 

The result of this allocation reveals that just one of these 21 days has occurred when prices were declining, while the other 20 took place when the market trend was up. Seventeen took place during the 2003/2007 expansion, while three others – before today- came after March 2009, the beginning of the current bull market.

 

Thus, the history of today’s pattern reveals, just like yesterday, another likeness of the current market to times when prices were on the rise.

 

DJIA                .36 percent

NASDAQ        .55 percent

S&P500           .45 percent

 

 all-three-up-three-again.gif

May 9, 2011 Advance Continues

Monday, May 9th, 2011

May 9, 2011                      Advance Continues

 

With the prices of these three indices rising for the second session in a row, consider the characteristics of today’s pattern. The record shows 206 repeats over the past 12 years – these amount to 7 1/4 percent of the more than 2,800 trading days since December 2000.

 

Now, consider only those two-day pairs with gains equal to, or less than, today’s changes of  .36 percent for the DJIA, .55 percent for the NASDAQ, and .45 percent for the S&P500. The total number then reduces to just 21 previous pairs.

 

The result of this allocation reveals that just one of these 21 days has occurred when prices were declining, while the other 20 took place when the market trend was up. Seventeen took place during the 2003/2007 expansion, while three others – before today- came after March 2009, the beginning of the current bull market.

 

Thus, the history of today’s pattern reveals another likeness of the current market to times when prices were on the rise.

 

DJIA                .36 percent

NASDAQ        .55 percent

S&P500           .45 percent

May 6, 2011 Up Day Ends Down Week

Saturday, May 7th, 2011

May 6, 2011                    
Up Day Ends Down Week

 

 

Finally, on a Friday,
prices turned higher after heading down since Monday. Yet today’s gains –the NASDAQ
up .46 percent, the DJIA plus .43 percent and .38 percent for the S&P500-
failed to restore these indices to their levels a week ago.  The S&P500 value today is -1.68 below last
Friday’s; similarly, the NASDAQ fell -1.60 percent while the DJIA lost -1.34
percent.

 

Today’s uptick is
consistent with the record and a further decline would have been unusual, since
only six instances exist when the market’s negative string extended to five
days.

 

As for this coming Monday, the
odds for a second positive close are about equal to the likelihood of another down
day. The record, since 2000, shows 189 declines for today’s pattern, while only
206 closes were higher.

 

DJIA                .43 percent

NASDAQ        .46 percent

S&P500           .38 percent

 

May 5, 2011 Prices Fall Again

Thursday, May 5th, 2011

May 5, 2011                       Prices Fall Again

 

 

The count now stands at four losing sessions in a row, an event suggesting pessimism and declining prices ahead. Yet this bad news masks a salient and positive fact:  this combination has occurred only rarely when prices top out. Yet, since 2000, the market has moved ahead straightaway and without delay. Further, ten of the last eighteen happenings came as the market bottomed.   Consequently, we know that prices rise far more often than they decline, following runs of four losses in a row.

 

Today’s diagram reveals these facts, and shows these improving prices over the last twelve years.

 

Should  tomorrow’s performance continue past patterns, then chances are 2:1 that the NASDAQ will advance, rather than drop for a fifth successive session. The record for the S&P500’s next day is almost as good, with eleven gains to seven losses. However, the projection for the DJIA is not as favorable, since its prices fell eight times, and rose on ten days.

 

Overall, five negative days in a row happened 17 times since 1950, with only six such closes since 2000. Finally, the last five-downs-in-a-row day happened on March 3, 2009, coinciding with the beginning of the current bull market.

 

DJIA              -1.10 percent

NASDAQ       -.48 percent

S&P500          -.91 percent

 

 no-two-three-indices-fall-4-in-a-row.gif

May 4, 2011 Third Successive Decline

Wednesday, May 4th, 2011

May 4, 2011                       Third Successive Decline

 

Do the losses of the last three days hint that the market is about to top out? People may ponder about this possibility simply because of the rapid pace of the recent advance. However, objectively, three losses in three days by these three indices need not translate to a decline in the near future. That is so simply because while there have been 53 other runs of three straight losses since 2000, the market topped out only twice: in 2000 and 2007.

 

Strangely, but actually, prices have always moved up, ending higher, on the last day of the upswing. At the 2000 top, both the NASDAQ and the S&P500 posted their fourth straight advance the day before the start of the market downturn.

 

Similarly, the day before the 2007 top, the NASDAQ again posted its fourth consecutive advance on the day before prices started their downturn.

 

Of course the counterargument to this logic is that prices of course move higher on the last day of the expansion; and then remind us that on April 29, last Friday, the NASDAQ posted its eighth straight gain, and that the other two indices closed up for the fourth successive day.

 

While this history is correct, we must add also, that none of these previous tops had runs of three straight declines in the first few weeks of these previous downturns.

 

DJIA              -.66 percent

NASDAQ      -.47 percent

S&P500         -.69 percent