USMarketView

          December 23, 2011                  Enjoy!!

DJIA            1.02 percent

NASDAQ      .74 percent

S&P500        .90 percent

          December 22, 2011                  Prices Advance

The day had no significant developments, at least from the analytical point of view. The DJIA and the S&P500 closed up for the third straightday while the NASDAQ also moved higher after yesterday’s decline.  The resulting pattern occurred a mere 17 previous times in this century.

Yet, because these days are not distributed in ways that relate to stock market swings, they do not provide any insights about the future.

As for tomorrow, in the past negatives dominated the day following this pattern, with 11 declines and only 6 advances.

Please note that the NASDAQ as well as the S&P500 rose by the identical percentage today. This coincidence should not, given current knowledge, be meaningful in terms of projecting future price movements.

DJIA            .51 percent

NASDAQ    .83 percent

S&P500       .83 percent

          December 21, 2011        Another Down Signal

With the NASDAQ off while the DJIA and the S&P500 posted their second gain in a row, today’s pattern is the 32^nd repeat of this combination since the beginning of 2000. The diagram locating these days reveals that their positions are indicative of falling prices.

This then is the third recent close having the same pattern that characterized previous days when the market was heading down.

The record shows this combination representing 1.48 percent and 1.70 percent of all days when the market trend was down; the equivalent figures for the two upturns is .78 and .85 percent.

Similar evidence concerns the following day: the S&P500 moved higher on 67 and 56 percent of the closes during the two declines. Prices moved up just 43 percent in both expansions.

We present this outlook based only on these averages, without performing statistical tests that indicate the significance of these differences.

DJIA            .04 percent

NASDAQ   -.99 percent

S&P500        .19 percent

Today’s strong results should remind us that large advances cluster when the trend of prices is down.  That’s right; this is not a typo. Our diagram illustrates this conclusion. Further, it shows that no advances like today happened during the 2003/2007 expansion. While two such increases did occur during this recovery, since March 2009, prices have drifted down and then up, and down … since this summer.

The facts are these: the DJIA history shows 56 closes as large, or larger, than today since the beginning of 2000. That comes to less than two percent of the near 3,000 trading days so far in this century. The S&P500 total is 63 days larger than today’s 2.98 percent close. The NASDAQ result of 121 closes reflects, of course, the go-go years before reality chopped valuations to just fractions of their highs.

Moreover, these single data points tend to overestimate the bullish fervor. Today’s diagram shows only the 44 days that each of the three indices ended higher than today’s combination.

We restate the evidence: days with large gains signal lower, not higher, prices ahead. Yet the diagram has some good news: these large gain days have a tendency to huddle near, and just before, prices stop falling and the beginning of the next recovery.

DJIA            2.87 percent

NASDAQ     3.19 percent

S&P500        2.98 percent

With the DJIA, NASDAQ and the S&P500 declining, the DJIA now has two straight losses, but the NASDAQ and the S&P500 are down only one day after last Thursday’s and Friday’s gains. Accordingly their pattern is -1/+2: minus one for today’s decline and plus two for their gains Thursday and Friday.

Only five other days, since 2000, share this combination. Our diagram identifies these with a red dot.

All but one of these closes share significant declines, impacting their prices shortly after posting a pattern like today’s. While the exact timing as well as the size of the losses remains unknown, the history behind today’s pattern requires compelling attention.

DJIA            -.84 percent

NASDAQ   -1.26 percent

S&P500       -1.17 percent

            December 16, 2011             Mixed Day Ends Week

The DJIA shaved -.02 percent from its previous close, but the S&P500 added .32 percent and the NASDAQ moved up  .56 percent. This pattern, a loss for the DJIA and the second gain in a row for the NASDAQ and the S&P500, happened on just 16 days since the start of 2000.

With most of these occurring while prices were on an upward trend, the outlook for higher prices looks promising.

On the following day, in the past, both the DJIA and the S&P500 moved higher twice as often as they declined. But losing days for the NASDAQ exceeded gains by -9:7.

DJIA            -.02 percent

NASDAQ      .56 percent

S&P500         .32 percent

December 15       Small Gains after Three Losses –Will Prices Regain 2010 Close?

The first positive close in four days did not do much to prices, as the DJIA moved only plus .38 percent. The S&P500   added .35 percent and the NASDAQ improved .07 percent. The pattern over the last four days, +1/-3, has  29 previous   appearances since the beginning of 2000.

Their frequency has been rising over the last 12 years. Using our usual four stages since 2000, they occurred in .67 percent of all closes between 2000 and 2003. They increased somewhat to .87 percent between 2003 and 2007. The percentage increased to 1.13 percent in the following decline. Currently, their rate has increased to 1.27 percent.

 With about 10 more trading days in 2011, we ask what are the chances that the these prices will return to, or better, last year’s final close. So far, at this point, the DJIA stands at 101.7 percent of the last 2010 close. However, given the downward trend since this summer, the DJIA’s last 2011 price could be less than the 2010 close.

The NASDAQ needs to gain at least 5.9 percent from today’s close to reach the 2010 close. The target for the S&P500 is plus 5 percent or it will close lower than at the end of last year.        

We projected a positive close for today, and prices did move higher. For tomorrow, based on the history of this pattern, chances are 4:3 for a lower close.

DJIA             .38 percent

NASDAQ      .07 percent

S&P500         .35 percent

December 14, 2011                                           Third Decline in a Row

Today’s pattern of three successive down days is the 57^th repeat in this century – not a common result given the 3,000 trading days since 2000. A noteworthy similarity exists also in the size of today’s markdowns and the average change of these 57 previous results: they are near equal. Today’s DJIA fall is -1.10 percent, compared to  -.93 percent of the previous mean. It is  -1.55 percent for the NASDAQ, almost identical to the -1.47 percent average; the S&P500 lost -1.13 percent, while the previous triple declines centered at  -1.17 percent.

These narrow differences, between today’s and the typical change over the last 12 years suggest a constant, permanent relationship.

The diagram locates these days, and identifies the following days’ changes. A significant difference exists between bear and bull markets. The number of increases and decreases is the same when prices trend down, but when prices are on the rise, increases dominate the following day.

DJIA            -1.10 percent

NASDAQ     -1.55 percent

S&P500        -1.13 percent

Our computer system is up again, after several painful days of sleuthing – although problems persist.

December 13, 2011           Another Down Day Prices fell for the second day in a row, with the NASDAQ losing as much as yesterday. The DJIA and the S&P500, however, descended just about half the rate of the day before. This generates a pattern for the three averages of -2/+1: two losses in a row after a positive day. There have been 151 such closes, with 75 occurring since January 2000. These were distributed almost equally over the two declines and expansions, representing 2.3 percent of all treading days in the 2000/2003 decline and the following upswing that ended at the end of 2007. 

Their frequencies increased since then, rising to 3.9 percent during the 2007/2009 drop and 2.6 percent since then.  Gains exceeded declines on the following session by a ratio of 41:34. DJIA             -.55 percentNASDAQ     -1.26 percent

S&P500        -.87 percent  

Our computer system is up again, after several painful days of sleuthing.