USMarketView

May 3, 2011                  Prices Fall for Second Day

The market moved down again, with the NASDAQ and S&P500 losses about twice as large as the day before. The DJIA went up by only .15; that change is so small, that it failed to round up to the .01 percent level.

This pattern of changes, minus two for the NASDAQ and S&P500 with the DJIA counted as plus one, is infrequent: it occurred on 38 closes going back to 1950, with just 16 since the beginning of 2000. Today’s diagram plots these, as well as the S&P500.

Actually, the indicated percent change is for the following day. In the past, these were distributed almost equally, with nine gains (green Empty Square) and seven losses (red Solid Square). Furthermore, the equality of the number of higher and lower prices for the next day extends also to their occurrence whether the price trend is up or down.

Hence, the pattern methodology fails to pinpoint any meaningful statistical measure for anticipating the direction of price changes tomorrow.

DJIA              No Change

NASDAQ      -.78 percent

 S&P500         -.34 percent

The NASDAQ declined -.33 percent today, ending a chain of eight consecutive gains. Given that the sequence did continue to nine straight upticks only eleven times since 1999, Friday’s negative day was overdue. Further, with the DJIA and the S&P500 scoring their fourth-in-a row advance on Friday, another positive close would have been surprising. The record book reveals not a single close of nine straight advances for the NASDAQ combined with five uninterrupted gains by the DJIA and the S&P500, ever.

Nevertheless, over the last 31 trading days since March 16, the DJIA moved up 10.3 percent, the NASDAQ added 9.8 percent and the S&P500 increased 8.5 percent. Yet these gains, as the diagram shows,  are modest rather than extraordinary.

The diagram reveals sequences of rising prices pairing with increases in the 31-day moving average. It shows that the higher –if not highest- moving averages occur when prices recover from earlier losses. Observably, when the market turns around from decline to advance, the moving average also increases. Thus it is highest in the period following the March 2009 recovery, after the market moved higher from its 2007 low.  Similarly, the spate of recent declining prices, just days ago in mid-April, reduced the moving average.  Yet that very action, in turn, made possible the escalation of the 31-day moving average over the last several days.

DJIA              -.02 percent

NASDAQ      -.33 percent

S&P500         -.18 percent