Todays strong results should remind us that large advances cluster when the trend of prices is down. Thats 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 todays 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. Todays diagram shows only the 44 days that each of the three indices ended higher than todays 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
