October 4, 2011 Strong Advance
The NASDAQ finally closed higher after four straight declines, gaining 2.95 percent. Today is its largest increase since the beginning of September, some 25 trading days ago. Yet todays closing price has not recouped to that earlier level. The S&P500 also had a good day, gaining 2.25 percent, similarly the DJIA moved up 1.44 percent.
Todays pattern of one increase after four declines for the NASDAQ- and one increase after two losses for the DJIA and the S&P500, is only the third occurrence since the beginning of 2000. In the past, these days split evenly between an increase and a decline.
Yet a favorable, if not an outright optimistic, outlook results when comparing this current, since March 2009, expansion with the previous full price cycle of 2000/2007. Todays figure plots both these cycles from their highpoints the day before prices started their drop.
While we have noted their similarities before, focus on the present drop and contrast it with the overall direction of the previous cycle. The time path of the current cycle seems to coincide with a pause in the earlier profile. Of course, todays reaction dwarfs the previous one, yet their timing coincides. Further, if prices in the near term future replicate the earlier cycle, we will avoid a deeper drop, instead enjoying a slower and less vigorous expansion than in the past two years.
DJIA 1.44 percent
NASDAQ 2.95 percent
S&P500 2.25 percent
