USMarketView

August 30, 2011                 Third Advance in a Row

You don’t see three straight gains often, yet today’s is the ninth so far this year. While there have been 69 others since the end of 1999, they are seen far more often in good times than when prices are heading down. Right now they come  3.5 percent of all closes since this recovery began in March 2009, whereas they amounted to just 1.08 percent in the previous, 2007/2009, downturn.

This same situation held in the 2003/2007 expansion, when the three straight advances came to 2.95 percent of all trading days. However, this ratio amounted to only 1.08 percent in the previous 2000/2003.

It seems plausible then to expect further gains, rather than corrections,  in the near future.

As for tomorrow, the record shows an almost even division between advances and declines. Further, this parity holds whether prices are rising or falling.

DJIA                    .18 percent

NASDAQ            .54 percent

S&P500              .23 percent

                             KNOW THE PAST . . . UNDERSTAND THE FUTURE

August 29, 2011      Close Resembles Turning Point Pattern

Prices moved substantially higher, with the NASDAQ adding  3.32 percent, the S&P500 increasing  2.83 percent, and the DJIA gaining  2.26 percent. These rank, as the 72^nd largest for the S&P500, the 95^th for the DJIA, and the 105^th for the NASDAQ, since the beginning of 2000.

The diagram identifying these days for the S&P500 reveals none has occurred during 2003/2007 bull market. Further, they concentrate where prices are declining. This conclusion seemingly contradicts Friday’s headline, that its pattern ‘resembles a bull market pattern.’

But it does not. Most of these closes precede lower turning points; while their positions predominate the falling price phases, they cluster immediately before the market turns higher. Thus, the two leaders, Friday’s and today’s, support each other.

Yet be on the lookout for further large declines: closes on the following day ranged from losses of  -4.41 percent to gains of  6.47 percent for the S&P500, minus -4.62 percent to  plus 4.93 percent for the DJIA, and to minus -5.01 percent to plus 7.19 percent for the NASDAQ.

As for tomorrow, today’s pattern of two up days following a single down day, has repeated 92 times in this century. The NASDAQ fell 37 times on the next day; the S&P500 had 43 losing days, while the DJIA declines total 52.

Friday’s projection, of lower closes for today, missed the mark.

DJIA                    2.26 percent

NASDAQ            3.32 percent

S&P500              2.83 percent

August 26, 2011                 Close Resembles Bull Market Pattern

Prices moved up after yesterday’s decline, almost recovering their losses of the day before. More significant, though, is the current pattern: increase, after decrease, after three straight increases. The record shows just 15 other closes since January 2000 with this +1/-1/+3 pattern. We identify these with solid red circles on today’s diagram.

Notice that only two of these days happened while the trend of prices was down. The other 13 repeats took place during the bull phases of 2003/2007 and the current expansion that started in March 2009.

Further, with prices moving higher then lower and then higher again, today’s pattern indicates that the overall direction of the market is up. Of course, we base this projection on the belief that daily patterns tend to follow previous price changes.

Looking at Monday, prices on the following day fell more often than they increased.

Today’s price advances are in line with our positive projection based on yesterday’s pattern

DJIA                    1.21 percent

NASDAQ            2.49 percent

S&P500                1.51 percent

August 25, 2011                 Prices Close Lower

Values fell for the first time this week with the DJIA off  -1.51 percent, the S&P500 down -1.56 percent and the NASDAQ losing -1.95 percent. This is the 26^th repeat of this pattern, -1/+3 in this century. The majority of these closes occurred when the trend of prices was up. For example, not even one crossed the tape during the 2007/2009 decline.

Prices on the following day moved higher far more often than they declined. The S&P500 record shows 19 gains against only 6 losses; the DJIA moved higher 18 times and fell on 7 days. The NASDAQ, though, shows a weaker next day, with only 15 advances and 10 declines.

Today’s projection calling for declines was realized.

DJIA                    -1.51 percent

NASDAQ            -1.95 percent

S&P500               -1.56 percent

August 24, 2011           Gains Continue

Prices moved higher for the third day in a row, a result seen on 227 other days, with 68 since 2000. Most of the closes on the following day, however, were negative. The NASDAQ had 38 losses and 30 increases, the S&P500 declined 36 times, moving higher on 32 days. The DJIA, on the other hand, moved higher on 38 next days and fell just 30 times.

Moving back to yesterday, when the earthquake combined with computer troubles stopped this blog, the averages scored substantial increases. Nevertheless, in the recent past, those gains occurred mostly when the market was declining. The diagram reveals that none was seen during the long price run up between 2003 and 2007. Most of these days cluster in the two major declines of 2000 and 2007. Yesterday’s incident, accordingly, requires caution rather than celebration.

DJIA                    1.29 percent

NASDAQ             .88 percent

S&P500              1.31 percent

August 23, 2011       Earthquake and Computer Combine, Denying Data Access

On record day, the earthquake on the East Coast ties up the computer!

Look for post later.

DJIA                    2.97 percent

NASDAQ            4.29 percent

S&P500              3.43 percent

August 22, 2011                  Small Changes Follow Steep Drop

Prices dropped some  -17 percent in the 31 days since the down draft started on July 7. Yet this sharp decline ranks only as the 97^th worst, ever. Thus today’s minimal gains fall far short of signaling this contraction’s end.

It is the first gain in four days for the NASDAQ, whereas the DJIA and the S&P500 positive close after two declines.

The record implies another decline for tomorrow following this pattern.

DJIA                     .34 percent

NASDAQ             .15  percent

S&P500                .03 percent

August 19, 2011                   Further Losses

Unfortunately the ‘Same Old, Same Old’ continues.
Whereas this, since March 2009, recovery had been advancing more rapidly than
its 2000-2007 predecessor, that advantage ended this week. The diagram shows
the last S&P500 cycle in red and the current sequence in blue.

The history of the daily price ups and downs is parallel,
and the current decline now mirrors the earlier cycle more closely. It took
1,895 trading days before prices returned to their 2000 level.

The current decline-and-recovery is about half way
there.

DJIA                  -1.57 percent

NASDAQ          -1.62 percent

S&P500            -1.50 percent

Prices plunged at the opening and never recovered. At the bell, the NASDAQ closed off  -5.22 percent, recording its 35^th drop ever. The other two indices fared little better, as the S&P500 lost  -4.46 percent, its 34^th worst day; the DJIA suffered the least damage, losing  -3.68 percent, scoring its 49^th largest loss.

With almost all of the deep losses coming during the last decline, from October 2007 to March 2009, today’s slump implies the coming of a sharp reduction of future values.

These large, negative changes suggest caution, since their history is clear: they come when prices decline. Nor are they common as the market approaches a bottom. The record indicates that a thoughtful and careful approach is best in times like these.

Price projections for tomorrow favor recovery: in the past, the NASDAQ scored seven advances but declined four times. Both the DJIA and the S&P500 increased on six days and declined on five.

DJIA                  -3.68 percent

NASDAQ          -5.22 percent

S&P500              -4.46 percent

While the DJIA and the S&P500 closed in the plus column, their gains came to less than .09 percent. The NASDAQ, declined however, losing -.47 percent. The resulting pattern – plus 1 for the DJIA and the S&P500; -2 for the NASDAQ – occurred 151 times overall with 28 since January 2000.

These closes though do not share the clustering of recent closes, that is, significantly more occurring in the two expansions than in the two declines since 2003. Nevertheless, 16 happened while prices were rising, and only 11 when prices were falling.

Indeed, while 12 of the 16 ‘expansion’ closes (75 percent) moved higher on the following day, 7 of the 11 ‘waning’ days (64 percent) also posted increases the next day.

Thus today’s configuration of changes point to further gains ahead; it does not support a projection for lower values in the future.

DJIA                  .04 percent

NASDAQ         -.47 percent

S&P500             .09 percent