June 3, 2011 Higher Unemployment and a New Outlook
Whether the report of higher unemployment influenced the market, or not, the DJIA and the S&P500 dropped for the third day in a row. The NASDAQ lost -1.46 percent, but because it stayed positive yesterday, the analysis focuses on three declines for the DJIA and the S&P500, but only one down day for the NASDAQ.
This pattern is so rare that it occurred only eight times since January 2000. Today, as every other market day this week, the ending combination of ups and downs is extraordinarily uncommon. Yesterdays pattern, for example, was just the 20th of its kind in the more than 4,000 trading days in this century.
Readers of this blog realize that its recent analysis focuses on where, in terms of rising or falling prices, these patterns show up. Until today, their location was dominantly in times of rising prices. But the current distribution, for the first time, reveals a definite shift, with these happenings now coinciding with falling prices.
Not only do most of these patterns crop up when the trend of prices is down; but also almost each observation happens just before prices turn down. Previously, many, if not most, appeared when prices tended up.
Yet, given the current climate, with its unexpected jump in the unemployment rate while the creditworthiness of our Treasury makes headlines, large price changes and frequent reversals in their direction are to be expected.
DJIA -.79 percent
NASDAQ -1.46 percent
S&P500 -.97 percent
