USMarketView

          January 17, 2012                Another ‘Down and Up’ Pattern

Today’s uptick just about restored prices to last Thursday’s levels. This increase following Friday’s losses leaves us with a -1/+1 pattern. It is the 211^th repeat of this combination since the beginning of 2000.

The record of these days, unfortunately, yields no insights into the direction of Wednesday’s market. Changes on the following day are distributed almost equally between another advance and a decline.

Further, their repeats do not reveal a systematic relationship in the past caused by price trends. While their frequency accounted for 4.6 percent of all closes in the 2000/2003 decline, it more than doubled, increasing to 9.3   percent during the next, 2007/2009, drop.   

A similar absence of cause and effect exists also when the trend of prices is up: while this pattern of down-then-up accounted for 8.6 percent of all days in the 2003/2007 expansion, it fell to 6.2 percent during the next, current recovery that began in early 2009.

DJIA             .48 percent

           NASDAQ      .64 percent

           S&P500         .36 percent

            January 13, 2012                Regularity and Losses End Week

 Today’s declines are the first in five trading days for the NASDAQ, in four days for the S&P500, and after Thursday’s limited DJIA advance. So far, there have been 466 such -1 days since January 2000. These account for about 16 percent of all closes in the past 12 years.

Only two possible outcomes are possible for the following trading day; a further decline, to two losses in a row, or an increase and a pattern of -1/+1. In the past, increases occurred more frequently than a second straight loss. Prices moved higher some 56 percent of following days, leaving just 44 percent falling for two succeeding days.

 The frequency of these following day ups and downs do correlate with eras of falling and rising price trends.  The ratio of next day price increases to decreases is just 80 percent during the 2000/2003 decline, while it rises to 158 percent in the following bull market. Similarly, the 2007/2009 drop saw  1.36 as many increases as declines, and the following, current phase ratio is 153 percent.

These differences do allow the inference that prices will continue to rise, since the current ratio of increases to decreases is [1] almost as large as during the 2003/2007 expansion, and [2] substantially larger than during the two previous declines.

The declining price projection for today was realized.

  DJIA             .17 percent

 NASDAQ      .51 percent

S&P500         .23 percent

          January 12, 2012                 Another Rare Array

Today’s pattern is even more unusual than yesterday’s: only one previous day closed with the NASDAQ up five times, the S&P500 posting four increases in a row while the DJIA scored a positive change after yesterday’s decline. Yet that rarity is overshadowed by the magnitudes of today’s changes.

Just 60 previous sessions, since January 2000 posted gains smaller than todays: the NASDAQ added .51 percent; the S&P500 increased .23 percent while the DJIA closed .17 percent than the day before.  With more than 3,000 trading days so far in this century, these 60 closes represent only two percent of that total.

Further, consider the graph – with a green dot locating these 60 sessions, today’s combination occurs principally when prices are moving higher; this sends a clear signal that this unusual combination accompanies a trend of rising prices.

Yet a word of caution: it is troubling to see these closes concentrated before and after the October 2007 top. There is another near-the-top cluster in the current, since March 2009, trend, but prices maintained their upward trend.

Our projection for today, based on the history of yesterday’s pattern, called correctly for higher prices. The outlook for tomorrow is negative, but cautiously so since the record shows just one previous close of this pattern.

DJIA             .17 percent

NASDAQ      .51 percent

S&P500         .23 percent

          January 11, 2012                 A Rare Pattern

The DJIA lost  -.11 percent today, its first decline after two gains in a row. The NASDAQ, however, added  .31 percent, the fourth straight increase, while the S&P500 gained  .03 percent for its third positive day. Only four other sessions share this combination of -1/+4/+3 in the entire history of the market since 1950. Furthermore, these closes came in the 20^th century, in 1990, 1995, and twice in 1997 – and prices moved higher on each of the following days.

Are today’s changes remarkable or just interesting? The immediate reply says just interesting, because the day’s changes are so minute relative to the size of these indices. The DJIA’s change, for example, amounts to just 13.22 dollars, or a minute .11 percent of its value.

Moreover, this pattern occurred on only four of the 15,590 trading days since 1950.

Yet, if these results are not random, but systematically related to changes in business and economic conditions, we have to research these combinations to ascertain their underlying causes.

DJIA            -.11 percent

NASDAQ      .31 percent

S&P500         .03 percent

            January 10, 2012                 Prices Continue Higher

 The NASDAQ posted its third straight gain, advancing .97 percent. The DJIA and the S&P500, moved higher for their second day, posting  .56 and .89 percent increases. Today’s pattern is the 11^th repeat since 2000, and 47^th overall.

The diagram identifies those previous days; it reveals an even distribution over good and bad times with the exception of the current, since the 2009 bottom, phase. These happened twice as often, -.55 percent of these days, as in the previous three segments.

Further, with the red dots representing declines on the following day, expectations for tomorrow are modest, given the 7 decreases and just 3 gains over the last four cycles since 2000.

DJIA            .56 percent

           NASDAQ     .97 percent

           S&P500        .89 percent

          January 9, 2012                 Small Advance Starts Week

While prices moved higher, they remained just about where they closed on Friday, the previous session.  The NASDAQ, rising for the second day in a row, added  .09 percent. That change is the 98^th smallest NASDAQ gain of the near 3,000 trading days since 2000. The DJIA and the S&P500 moved up  .27 and .23 percent, moving up following their previous days’ declines. Their gains were also moderate, ranking as the 400^th and 360^th smallest advances in the past 13 years.

Today’s diagram plots the S&P500’s daily closes. It shows they are distributed in just about the same proportion, when prices are trending higher and when they are falling. Accordingly, this analysis fails to bring new understanding of the connectedness of daily price patterns and the underlying market trend.

Not much can be added about tomorrow’s outcomes; in the past the next day closed higher 17 times and declined on 18 days.

DJIA            .23 percent

NASDAQ     .09 percent

S&P500        .23 percent

January 6, 2012   

Little Change in 2012 First Week Trading

DJIA            -.45  percent

NASDAQ      .16  percent

S&P500        -.25 percent

P. S.  Holiday celebrations account for the lapse of daily coverage.

          January 3, 2012                 Strong Start Does Not Signal Strong Year

The good news is that the first day of 2012 trading ended significantly  positive,   yet the conclusion that this year will be a great year does not follow! The diagram illustrates this sobering news. Indeed the scatter implies the very opposite: the larger annual gains in the S&P500’s value pair with declines on the year’s first trading day.

Today’s S&P500 change of 1.55 percent is located arbitrarily at the zero percent annual gain level. Hopefully, we bulls expect it to move to the right as the year progresses.

We’ll highlight more history and analysis of year start and end data every day of this first 2012 trading week.

DJIA             .90 percent

NASDAQ    1.67 percent

S&P500       1.55 percent