July 14, 2011 Up then Down
Five reversals over the nine trading days since the beginning of the month generates a where are we attitude. Furthermore, the market continues to generate unusual or rare combination of patterns. Todays pattern, as on many other days, has occurred on just four previous occasions in the past 12 years! Adding these uncertainties to the core risks fundamental to investing, leave little incentive to make new commitments.
Yet the comparison of the price movements of the current cycle with the previous, 2000-2007 downturn and recovery, allows a useful perspective. At the diagrams start, both cycles highest price is positioned at day One. Note that it took 1,835 trading days before the prior sequence returned to its previous high. In stark contrast, the current cycle stands at only 1,185 days after its October 2007 top.
That recognition, that now we are merely two-thirds of the span of the previous run, brings a level of comfort. Unless there is a reasonable justification to explain why the current run should end sooner, the previous and the current cycles will have parallel features.
DJIA -.44 percent
NASDAQ -1.22 percent
S&P500 -.67 percent
