USMarketView

February 13, 2012            Week Opens Higher

Prices, which fell on Friday after three gains in a row, recovered today. This pattern, of +1/-1/+3, has now posted its18th repeat since the start of 2000. Only two of these incidents happened while prices were trending down.  The balance is divided equally between the 2003/2007 and the current expansion.

Since these data show such significant identification with rising prices, today’s market signals the continuation of this bull market.

The outlook for tomorrow is positive, even though in the past the eight positive next day closes were outnumbered slightly by the nine subsequent declines.

DJIA            .57 percent

NASDAQ    .95 percent    

S&P500        .68 percent 

February  10, 2012   Up Then Down Continues

Prices closed lower, breaking the three day run of consecutive gains. Only 28 other days since January 2000 share this pattern. In the past, prices returned to the positive on the following day 23 times; they fell only 6 times.

We look at the record to consider the possible outcome of Monday’s market. We find an almost equal number of one positive close after a single decline, +1/-1, as one decline after a single increase, -1/+1. These add up to 980 incidents, or about a third of the 3,000 trading days so far in this century.

A casual examination of these pairs reveals no correlation or clustering associated with bear or bull markets. Moreover, each of these segments of rising or falling prices, has almost an equal number +1/-1  and -1/+1  pairs.

Another approach in projecting  the market on the following day, is to consider the history of today’s pattern – that is, a decline after three successive gains. In the past the next day positive closes exceeded the next day’s declines by a factor 22 to 5. 

DJIA                 - .69  percent

NASDAQ         - .80  percent

S&P500            - .69  percent

February 9, 2012              Third Straight Positive Session

Increases continued for the third day in a row, as the market posted the 76^th repeat of the +3/+3/+3 pattern since January 2000. Many of these closes are concentrated in bull markets; they represent 2.9 percent of all trading days during the 2003/2007 expansion, and almost four percent of the 730 days since the 2009 bottom. These proportions fall to only 1.1 percent in the 2000/2003 and 2007/2009 bear phases.

With the difference in these ratios so large –the up market rate is three to four times the size of the down market frequency- today’s market  confirms  that the current advance in prices will continue  in the near future.

Yet the outlook for tomorrow is not promising; in the past, the 39 losses on the following day exceeded the 36 increases.

We note also that the downsizing of these daily gains continues. Whereas today’s S&P500 advanced .15 percent, the average gain over the 75 previous, three upticks in row, closes was .83 percent. Similarly, the DJIA’s average gain of .80 percent overwhelms today  .05 percent increase, while the NASDAQ’s  .39 percent advance is less than half the .99 percent average.

DJIA                 .05 percent

NASDAQ         .39 percent

S&P500           .15 percent

February 8, 2012              Another Gain But Changes Remain Small

The three indices moved higher for the second day in a row, with the NASDAQ rising .41 percent, the S&P500 adding .22 percent and the DJIA increasing .04 percent. These magnitudes are far below the average daily gain between January 2000 and today. The DJIA daily change averaged .80 percent, some 20 times larger than the one posted today. The NASDAQ and the S&P500 gains have similar proportions, with the former’s daily mean change of .77 percent while the daily S&P500 gain averaged  .88 percent.

Yet on average, daily advances when prices decline outperform those in bull markets. Consider the data for the S&P500. Its mean daily gain in the bear market of 2000/2003 was .82 percent; this fell to .52 percent in the following 2007/2009 advance. Similarly, during the following decline, the average daily gain rose to 1.37 percent while the current, since 2009, upswing gain came in at .77 percent.

Looking ahead, expectations for tomorrow’s market are evenly divided between another   gain and a decline. The record shows 220 closes with today’s pattern, with the following days split evenly between losses and gains.

DJIA            .04 percent

NASDAQ    .41 percent

S&P500       .22 percent

February 7, 2012                      Small Increases Follow Yesterday’s Smaller Losses

Today’s market closed in an almost symmetrical move, correcting yesterday’s odd profile.  On Monday, prices declined after several advances, whereas today’s close was the 220^th repeat of an uptick after a single loss. Both the DJIA and the S&P500 gained .31 percent, whereas the DJIA and the NASDAQ lost     .13 percent the day before.

Surely, this is a coincidence!  Nevertheless, these are the facts.

Analyzing the combined pattern of Monday and today, of a +1/+1/+1 pattern following the -1/-1/-1 of the day before, the data reveal an almost equal number of plusses and minuses. Two other features deserve attention. First, on the following day, whether prices fall or rise, on the following day, the average loss hovers near zero; two, but the range goes all the way to 5 percent.

DJIA                 .31 percent

NASDAQ         .08 percent

S&P500           .31 percent

February 6, 2012                      An Alert

Only two other sessions had today’s pattern; both occurred before prices hit their top on October 9, 2007. The closer one hit on August 13, 2007, just 40 trading days before the market turned down. Yet price moved up and down even at the earlier close on November 2006, some 233 trading days before prices started their fall. It was not until March 2009, that values hit their most recent bottom, and started to recoup their losses. As noted yesterday, only recently has the NASDAQ surpassed its 2007 top, and not by much.

At the end of the day, the S&P500 lost .04 percent; both the DJIA and the NASDAQ fell -.13 percent.  This continues the recent series of small daily changes. We have described in earlier posts that historically, these minor daily ups and downs happen before, and anticipate, downturns.

The outlook for tomorrow, calls for falling prices for these three indices, based on the record of this pattern on the following day.

DJIA                 -.13 percent

NASDAQ         -.13 percent

S&P500           -.04 percent

February 3, 2012                      Unique Combinations Continue

Today’s pattern of four straight gains for the NASDAQ, three advances in a row for the S&P500, and just one uptick for the DJIA, has not happened since 1996. Indeed our data show only one other close –in February 1983- with this combination. With the market moving higher in both cases, this latest repeat should be reassuring, since it signals continuation of recent gains.

We neglected to notice that the NASDAQ recovered its October 2007 high last week. That happened on January 25, and today this index closed at 103 percent of that 2007 high.

Both the DJIA and the S&P500 remain far behind, reaching 89.7 percent and 85.9 percent of their top, 2007, values.

The diagram reveals the recovery disparities of these indices. The NASDAQ’s two spurts account for these differences. Yet it fails to maintain that advantage, retreating to the lower rates of the other two indices. Notice however that the NASDAQ appears to be accelerating again.

DJIA                 1.23 percent

NASDAQ         1.61 percent

S&P500         1.39 percent

February 1, 2012                        Best Gain Since January 25

The NASDAQ gain of  1.16 percent is its second in as many days. Better news, however, comes from the DJIA and the S&P500: they returned to the upside after posting four losses in a row. Further, today reversed the recent runs of small gains that dominated the past week.

The pattern of two NASDAQ advances paired with single day increases for the DJIA and the S&P500 is the 35^th repeat since the beginning of the century. These combinations occurred almost evenly over the two bull and bear markets, betraying no propensity to dominate rising or falling prices. Yet analyzing these events more carefully, reveals a distinct difference in their frequency that favors falling markets. These closes accounted for 1.48 and 1.69 percent of all days when prices were moving lower, but they occurred on only 1.03 and .85 percent of the time during price increases.

While these are small numbers, nevertheless note that their frequency in bear markets is about twice as that of the bull market. Accordingly, today’s action implies lower prices ahead.  

Action on the days following this pattern was distributed equally, however, with 18 price increases and 17 declines.

DJIA                   .59 percent

NASDAQ          1.16 percent

S&P500              .81  percent

January 31, 2012                        More of the Unfamiliar

With just three other sessions posting this pattern in the last 12 years, today’s result continues the recent spate of odd patterns. Moreover, the last repeat occurred during July 2004, just as prices continued their increase, after a short, resting pause. The other two incidents came in similar circumstances – after prices returned to their losing trend that ended with the market trough of 2003.

Look for more features and dimensions of this ‘four declines for the DJIA and the S&P500 while the NASDAQ had a positive close’ will be posted later today.

DJIA                  -.16 percent

NASDAQ           .07 percent

S&P500           -.05  percent