September 2, 2011 Sixth Substantial Loss
With values falling more than 2 percent, today is the sixth sizable decline in last 23 trading days. This count includes at least three drops deeper than 4 percent since the beginning of August. It is prudent, therefore, to consider if the market has seen its top already, and is now in retreat.
The S&P500 reached its highest recent close on August 7; therefore, by assigning 100 percent to this value, we can compare this top with the last two highest market prices in 2000 and 2007.
That diagram shows clearly that the past S&P500 cycles and current prices share almost identical proportional losses in the immediate days after reaching their tops. It reveals also the 2011 decline as much sharper than in the previous two cycles.
We see also identical loss profiles for the three cycles during days 20 and 50 after prices decline from their peak values.
Note however one significant difference not revealed by this diagram: the current S&P500 so far has failed to return to its previous peak value of October 2007 before declining. However, the two earlier cycles did recover to the previous high before turning down.
DJIA -2.25 percent
NASDAQ -2.65 percent
S&P500 -2.59 percent
