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 yesterdays losses, added .65 and .99 percent. In summary, todays 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 declines 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 tomorrows market.
DJIA .65 percent
NASDAQ 1.14 percent
S&P500 .99 percent