USMarketView

January 30, 2012                          Another Uncommon Pattern

Today continued the recent repeats of [1] small changes, [2] unusual combinations, and [3] small number of earlier sessions with these characteristics. At the close, the NASDAQ fell after yesterday’s gain, whereas the DJIA and the S&P500 moved higher, reversing their increases of the previous day.

There are just eight such days in the record – and non since 2009. Further, the one before came in 2004.

We are continuing the study of these rare combinations but their very infrequency makes it a difficult task and prevents a statistically significant explanation. Moreover, we have not perceived, to date, a common thread in these repeats.

Perhaps there is none, yet their recent happenings demand attention.

DJIA                  .45 percent

NASDAQ         -.27 percent

S&P500            .28 percent

January 27, 2012                          Mixed Days Continue

The DJIA and the S&P500 lost ground today whereas the NASDAQ moved higher. Further, the closing changes were   narrow, ranging from the positive .38 percent of the NASDAQ to  the  DJIA’s loss of -.58 percent, with the S&P500 down -.16 percent.

At the end of the week’s last session, the resulting pattern was +1 for the  NASDAQ and -1 for the other two indices, a combination seen only 21 other days since the beginning of 2000. However, their distribution does not show a useful projection pattern. Almost all, 18 in total, occurred between the 2000 top and the 2007 peak, with the other three since the March 2009 bottom.

These changes do not provide a useful guide for Monday, because the following day changes consist of 11 gains and 10 losses.

DJIA                 -.58 percent

NASDAQ            .38 percent

S&P500             -.16 percent

January 26, 2012                Prices Backtrack

Small losses set the three indices back but by less than yesterday’s advance. Today’s pattern, combined with Thursday’s changes is its 15^th repeat in this century.

In the past, the following day was split almost evenly between eight further declines and six increases.

Further, these occurred just about as often during bull and bear markets.

DJIA            -.19 percent

NASDAQ    -.44 percent

            S&P500        -.69 percent

          January 25, 2012                A Good Day

The NASDAQ, up for the second straight session, advanced 1.14 percent, while the DJIA and the S&P500, rising after yesterday’s losses, added .65 and .99 percent. In summary, today’s pattern of +2 for the NASDAQ and +1 for the other two indices has 35 previous closes in the past 13 years.

With 15 of these crossing the tape during the two bear markets and the other 18 occurring the two bull markets, it seems this pattern has little forecasting value. However, since the number of trading days in good times is about double the bad time frequency, the conclusion must be that this configuration signals caution.

Yet the average price change for this pattern displays a counter intuitive feature: the first decline’s mean percentage increase is near 150 percent of the next, following bull market.

Moreover, not only do the increases during the next down-then-up phases also share this divergent trait, in addition, the ratio of bear to bull market daily changes soars to near four!

Since the record of the following day reveals an almost equal number of declines and gains, a projection for tomorrow’s market.

DJIA            .65 percent

NASDAQ    1.14 percent

S&P500         .99 percent

          January 24, 2012                Small Changes an Upbeat Signal?

Prices moved unevenly with negligible ups and downs, while only four other days closed with today’s pattern of one gain for the NASDAQ, one decline for the S&P500, and two drops in a row for the DJIA. All of these however, date back to the last century, with the latest one in 1993. These are too far back to serve as a guide in 2012.

Yet focus on the magnitude of today’s market reveals yields important insights – which we have pinpointed before – namely that small daily price changes cluster when prices are moving higher. The combination of the NASDAQ rising in the range of zero and .09 percent, while the S&P500 and the DJIA were falling by  -.10 and  -.25 percent, happened just eight times. Further all occurred since 2003.

Most important, they all came in rising markets: six during the 2007/2009 expansion and two since the market bottom of 2009.

These placements tend to confirm our previously stated deduction that negligible daily changes signal rising prices ahead.

DJIA            -.25 percent

NASDAQ      .09 percent

S&P500        -.10 percent

           January 23, 2012                A Never Before Pattern

With the S&P500 closing higher for the fifth straight session, while the DJIA declined and the NASDAQ posted another, second day loss, the market closed with a pattern not seen before. The good news is that five advances for the S&P500 –neglecting the other two indices- occur more often when prices are rising.

The diagram locates the 47 days when the S&P500 posted its fifth straight gain. It shows that most of these closes happen when the price trend is up. During the two falling markets of 2000/2003 and 2007/2009, just six such days are on the figure. The other 39 days belong to the two bull markets of this century.

Yet, with the following day having as many losses as gains, a projection for tomorrow is not possible.

DJIA            -.09 percent

NASDAQ     -.09 percent

S&P500         .05 percent

          January 20, 2012                Small Changes

Although the DJIA gained  .75 percent, the S&P500 moved just .07 percent, whereas the NASDAQ fell -.06 percent. That decline ended the four day streak of advances.  Only seven other closes since the beginning of 2000 posted this combination.

Regrettably these previous occasions fail to reveal insights into the trend of future prices. Similarly for tomorrow, with the following day record of four decreases and three gains, no projections are possible.

DJIA             .75 percent

NASDAQ     -.06 percent

S&P500         .07 percent

          January 19, 2012                Third Advance in a Row

Even though today’s advances were modest, their pattern –the DJIA, NASDAQ and the S&P500 all up for the third straight session- promises increasing values ahead. Sixty of these ‘plus three’ days took place during the two expansions starting in 2003 and 2009. The other 12 incidents came while prices were falling in 2000 and 2007.

Today’s diagram locates these 72 days, using green dots to identify another gain on the following day, and the red dots showing losses the next session. The numbers below the price graph summarize the total number of next day gains and losses for each of the four price-change segments.

The average daily gain of the S&P500 for these 72 days comes to .84 percent but they vary significantly –and importantly- by overall price trends. The mean positive change of the two declining price phases come to  1.58 and 1.49 percent, while the average gains during the two expansions are .36 and .76 percent.

Significantly, today’s S&P500 increase of .49 percent is in that range.

Accordingly, this relationship yields a basis for projecting the trend of future prices, albeit a counter intuitive one: large price changes in the three straight up-days scenario implies falling prices in the future.

Yet these data do not allow a conjecture of what tomorrow will bring because the record reveals an almost equal division between advances and declines on the following day.

DJIA             .37 percent

NASDAQ      .67 percent

S&P500         .49 percent

          January 18, 2012                Second Best Day of Year

Prices advanced more than one percent for the NASDAQ and the S&P500 while the DJIA gained  .78 percent. These increases were the largest since the opening day of 2012.

Further, it was just the second time that the NASDAQ scored two advances in a row, while the DJIA and the S&P500 notched their third two day run. It was the 214^th replication of two gains end to end in this century, and the 93^rd two-in-a-row after a single decline.

Our diagram plots these 93 days; it shows that these +2/-1 sequences do not have a systematic relationship with trends of rising and falling prices.    For example, these closes amounted to 3.9 percent of all days in both the 2003/2007 expansion as well as in the following decline.

Similarly, they fail to provide insights for tomorrow; the number of increases (green dots) just about equal for each of these price segments, except for the current period. However, increases occurred almost three times more often than (red dots) in the current, since 2009 period.

There was no projection for today’s price changes since yesterday’s pattern had an equal number of gains and losses on the following day. Unhappily today’s pattern also fails to yield insights for the same reason.

DJIA             .78 percent

NASDAQ    1.53 percent

S&P500       1.11 percent