Archive for August, 2011

August 16, 2011 Retreat Follows Three Advances

Tuesday, August 16th, 2011

August 16, 2011                   Retreat Follows Three Advances

 

 

The NASDAQ, falling  -1.24 percent, gave back about two-thirds of yesterday’s gain. The S&P500 lost  -.97 percent, nearly half yesterday’s increase, while the DJIA, off  -.67 percent, lost a third of its previous advance. The pattern of the last two days, -1/+3, or one gain after three declines, is the 25th repeat since the beginning of 2000.

 

Most of these closes happened while prices were on the rise: 13 between 2003 and 2007, and 7 since the March 2009 bottom.  But a caution is required because most of these up days happened near the top, before the market turned down and fell into a lengthy decline.

 

The same partitions exist also for the following day – for tomorrow. The two downhill segments posted two gains and two losses. Significant drive, however, existed while prices were moving higher. Four of the seven closes since 2009 saw advances on the next day, and similarly, twelve of the thirteen 2003/2007 days moved higher.

 

Yet we must repeat our earlier caution. That only a short time later, prices fell and started a long decline.

 

DJIA                  -.67 percent

NASDAQ         -1.24 percent

S&P500              -.97 percent

August 15, 2011 Third Advance

Tuesday, August 16th, 2011

August 15, 2011              Third Advance

 

 

Prices moved higher for the third day in a row, yielding a pattern seen 67 times since 2000. The diagram below shows teir distribution over the four down-then-up history. We see these distributed almost equally over increasing and decreasing prices.

 

Yet, with the current cluster mirroring their frequency just before the market’s last top in October 2007, this pattern could be signaling a similar downturn in the future.

 

In the past, there were an equal number of gains and declines on the following day.

 

 

 

 

 

DJIA                   1.90 percent

NASDAQ           1.88 percent

S&P500              2.18 percent

 

 three-up-in-a-row-all-three.gif

August 12, 2011 Finally, A Typical Day

Saturday, August 13th, 2011

August 12, 2011              Finally, A Typical Day

 

Today the market closed without the large daily changes that dominated recent trading. Similarly, today’s pattern is not so singular that prevents a price projection with statistical significant. Unlike the last several days, today’s close of price change has enough repeats to allow projections with statistical significance.

 

The pattern, +2/-1/+1, that is two gains after a decline that follows a losing day, has occurred on 30 previous closes since the year 2000. With that record showing 18 losses and 12 increases on the following day, another advance on Monday is unlikely.

 

History also reveals that sustained price increases are more likely with a sequence of small daily changes. On reviewing the diagram, we see that rising prices happen more often with small daily changes (the dots); that price declines and wide, disparate daily variations go hand-in-hand.

 

 

 

DJIA                   1.13 percent

NASDAQ            .61 percent

S&P500               .53 percent

 

 small-changes-prices-rise-large-changes-prices-fall.gif

August 11, 2011 Large Gains Offsets Yesterday’s Deep Drops

Thursday, August 11th, 2011

August 11, 2011           Large Gains Offsets Yesterday’s Deep Drops

 

 

 

While prices continue to whiplash up and down, the more essential character of this market involves the size of these daily, almost offsetting, changes. Our earlier posts have already detailed their relative size: these rank in the top or bottom 35 of the 15,000 daily closes in our database that starts in 1950.

 

Today’s figure places these outsized changes on the graph of the S&P500 daily closes over the last 12 years. These cluster around the two major downturns, of 2000/2003 and 2007/2009. They have never occurred at market tops. Nor can these large gains and losses forecast the end of the decline or the beginning of the upturn.

 

Telling also is their absence –both plus and minus- when lengthy runs of price increases dominate the action.

 

These characteristics, nevertheless, fail to provide a clear signal of the direction of prices in the future – except to confirm that the recovery, started in March 2009, has run into a strong counter current.

 

 

DJIA                  3.92 percent

NASDAQ          4.69 percent

S&P500            4.63 percent

 

 changes-up-or-down-35-percent-and-more.gif

 

 

August 10, 2011 Deep Drop Continues Daily Roller Coaster

Wednesday, August 10th, 2011

August 10, 2011                   Deep Drop Continues Daily Roller Coaster

 

 

 

Today’s sharp decline wiped out all and more than yesterday’s rally. The DJIA, down  -4.62 percent posted its 26th worst day ever. The S&P500 dropped  -4.42 percent on its 35th deepest loss while the NASDAQ’s  -4.09 percent ranks in 74th place.

 

Such magnitudes of change, occurring over a mere seven trading days, leave no significant basis for projecting tomorrow’s action. Even if a conjecture were attempted, the rarity of the record leaves such a prediction without any statistical significance.

 

Unfortunately so, says the pundit, and ‘where are you when needed most’ complains the investor.  

 

DJIA                 -4.62 percent

NASDAQ          -4.09 percent

S&P500            -4.42 percent

August 9, 2011 Substantial Recovery

Wednesday, August 10th, 2011

August 9, 2011                   Substantial Recovery

Published 10:20 Eastern, August 10

 

Prices jumped higher but failed to overcome yesterday’s huge losses. Yet changes ranked by positive size occupied nearly the same order as yesterday’s negatives.

 

The NASDAQ gain of 5.29 percent is the fifth largest increase since 2000 – yesterday’s -6.90 percent loss ranks as its eighth deepest. Similarly, the DJIA gain is its 19th greatest while the loss was the seventh worst.

 

Given these escalations, we believe projections by size, rather than pattern frequency, present a more useful approach. In the past, increases occurred twice as often as declines.

 

Yet these facts contradict the conventional wisdom that large changes in one direction are offset the next day by similar sized changes in the opposite direction. Indeed that’s what happened today.

 

DJIA                  3.98 percent

NASDAQ          5.29 percent

S&P500              4.74 percent

 

August 5, 2011 Computer Breakdown Persists Analysis of Current Market Will Follow

Monday, August 8th, 2011

August 5, 2011                   Computer Breakdown Persists

                                    Analysis of Current Market Will Follow

 

 

While we cannot provide details with the computer tie-up, the serious decline on Tuesday, trailed by the near record drop on Thursday need not spell a substantial market drop.

 

There have been ten other sessions since 1999 with falloffs this large. Importantly, significant declines did not follow.  For example, the 2009 bottom witnessed several such massive markdowns; then prices moved higher with almost no interruption.  

 

We expect to substantiate these remarks with solid data. Unfortunately, this computer breakdown coincides with the current significant debt and price reaction.

 

Therefore, without the hard data, we nevertheless publish this heads-up.

August 4, 2011 Financial Markets Wake Up

Thursday, August 4th, 2011

August 4, 2011                   Financial Markets Wake Up

 

 

Prices heading down for seven days in a row while the Congress haggled over exactly how to cap the national debt and reduce the continuing deficits may have signaled investors’ unease over the coming impact on business and the economy. Today’s disastrous losses then reflect the spreading recognition that the cut of government spending will result in a slower economy and the continuation of high unemployment.

 

Reputable and mainstream economists have taught that decreased spending will multiply to an even larger cut in total demand. Yet the media and everybody else signed on to the mantra that the rising national debt spells disaster for our country.

 

This naïve reckoning fails on the facts but probably results from the preferences of many Americans to limit government. The enemy is not so much what government does, but that government does it.

 

Yet the economic engine will slow down as spending slows down. These new limitations on government disbursements will increase our already high and long lasting unemployment.

 

No wonder then today’s massive drop: the consequences of Washington’s fiscal restructure means a coming wave of lower spending higher unemployment.

 

DJIA               -4.31  percent

NASDAQ       -5.08  percent

S&P500          -4.78   percent

August 2, 2011 Loss After Loss After Loss …

Tuesday, August 2nd, 2011

August 2, 2011                   Loss After Loss After Loss …

 

The market suffered its worst loss since the downward spiral begun, eight trading days ago. The DJIA has closed lower for eight successive days and the S&P500’s losing streak is now in its seventh day. While the NASDAQ losing count stands only at three, that is because a small gain of  .05 percent four days ago, momentarily interrupted its downward spiral.

 

This is not just another down day. Only 65 other sessions suffered deeper losses in the 2,900 plus trading days since 1999.

 

Further, as shown by the diagram, most, if not all, of these closes occur when prices are trending down.

 

Accordingly, we suggest reexamining those earlier projections of prices continuing their rally. Simply put,  recent daily patterns are associated more with declines than advances.

 

The outlook for tomorrow favors positive closes. In the past, 58 percent of the DJIA and the S&P500 following days closed higher, while the NASDAQ advance ratio was just 48 percent.

 

DJIA            -2.19   percent

NASDAQ    -2.75   percent

S&P500       -2.56   percent

 

 sp-down-256-d-down-219-n-down-275.gif

 

August 1, 2011 New Market Pattern Again

Monday, August 1st, 2011

August 1, 2011                   New Market Pattern Again

 

 

Since all three indices declined again, repeating Friday’s ‘never before’ pattern, a projection based on history is unavailable. Nevertheless, a closer, perhaps different insight becomes available.

 

The DJIA has now posted its seventh straight decline, only the 46th such series since 1950. Four occurred since 1999.

 

The S&P500’s sixth straight loss is the fifth repeat in this century, with 104 other closes going back to 1950.

 

Finally, the NASDAQ fall for the second day in a row is its 1,123rd overall and the 335th in this century. (Note: it is logical that the shorter the daily run total, the more frequent its occurrence.)

 

We project Tuesday’s closes by using the above individual index records. Both the DJIA and the NASDAQ show an equal number of gains and losses on the following day. However history reveals a more favorable outlook for the S&P500, since it moved higher on four out of five closes on the following day.

 

DJIA            -.09   percent

NASDAQ    -.43   percent

S&P500       -.41   percent