January 19, 2012 Third Advance in a Row
Even though todays 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.
Todays 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, todays 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
