USMarketView

April 12, 2012              Prices Continue Higher

The DJIA and the S&P500 added far more than their average change for two the second day of advances. Yesterday the DJIA gained 1.41 percent, compared to its 1.00 percent mean change since 2000 when it posts two straight gains. Similarly, the S&P500’s 1.38 percent increase exceeds its 1.1 percent average. However, the NASDAQ fell behind its historic 1.6 percent advance, increasing just 1.30 percent.

Other features of yesterday’s changes continue to support the view that prices, far from tumbling, will remain on their upward track. In the past, two gains in a row occurred near 15 percent of the time when prices were trending higher, but came to only 2.4 percent of the bear market closes.

The diagram shows this advantage by plotting the three advances in a row in this century.

 DJIA            1.41 percent

NASDAQ     1.30 percent

S&P500         1.38 percent

April 12, 2012              Prices Continue Higher

The DJIA and the S&P500 added far more than their average change for two the second day of advances. Yesterday the DJIA gained 1.41 percent, compared to its 1.00 percent mean change since 2000 when it posts two straight gains. Similarly, the S&P500’s 1.38 percent increase exceeds its 1.1 percent average. However, the NASDAQ fell behind its historic 1.6 percent advance, increasing just 1.30 percent.

Other features of yesterday’s changes continue to support the view that prices, far from tumbling, will remain on their upward track. In the past, two gains in a row occurred near 15 percent of the time when prices were trending higher, but came to only 2.4 percent of the bear market closes.

The diagram shows this advantage by plotting the three advances in a row in this century.

 DJIA            1.41 percent

NASDAQ     1.30 percent

S&P500         1.38 percent

(more…)

April 10, 2012         Recent Patterns Mirror Bottoms – Not Tops

Today’s pattern occurred just once before, on September 3, 2002 – near the end of the 2000 bear market. On that day, when the DJIA and the S&P500 closed down for the fifth day in a row, they dropped more than minus four percent.

By comparison, today’s closes of about -1.71 percent seem modest, notwithstanding their severity.

Then, on the following day, prices recovered less than half of those losses. Further, the market remained at this depressed level for another two months, before finally turning higher.

Yet despite this technical history, the consensus continues to focus on fundamentals to justify the concern that values will head down.

While brief, these insights from the past indicate that expectations of a major decline are far from convincing.

 DJIA              -1.65 percent

NASDAQ       -1.83 percent

S&P500          -1.71 percent

April 9, 2012    Down Day with Positive History 

The DJIA and the  S&P500 dropped for the fourth straight session as the  NASDAQ joined the decline. Yet history offsets that negative news – showing the other two such days occurring just before prices ended their long decline in 2003.

Further, that market’s profile of continuous ups-and-downs matches the ongoing variability price changes. Today, as then, variability shrouds the market’s trend.

Finally, the next day’s changes are divided equally between one gain and one decline.

April 5, 2012           DJIA, S&P500 Down Third Day

But the NASDAQ moved up, after two successive declines. This unusual combination occurred just 11 other times in the past thirteen years. On the other hand, surprisingly, the count rises to 58 when all three indices decline on three successive days.

Yet these similarities aside, we have two distinct events since the price declines average more than minus one percent in this case, whereas today’s losses are just -.06 percent for the S&P500 and  -.11 percent for the DJIA.

The direction of the market, however, is a more crucial issue though. With the focus of daily headlines on Federal Reserve policy changes, European defaults and other external events possibly overwhelming the dynamics of the ongoing bull market, it’s imperative to remember that prices never have moved smoothly in any one direction.

As our diagram shows – individual daily changes do not reveal the market’s underlying direction. Prices fluctuate daily, they do not move smoothly. Unlike a plane taking off and landing, financial markets do not deliver a smooth ride.

DJIA               -.11 percent

NASDAQ        .40 percent

S&P500           -.06 percent

April 4, 2012                   Prices Fall Again Down for two days in a row does not mean disaster ahead – at least  the record does not show such a one/two step. The  market has seen 162 other closes with this pattern.

Increases just about equaled the number of decreases on the following day.  Further, they were as frequent in rising markets as in declining ones, accounting for about five percent of all days.

The only exception occurred during the 2007/2009 decline, when they fell to 3.4 percent.

These comparisons represent a positive outlook, one that contradicts the pessimism suddenly sweeping most commentaries. We have not been hesitant to hoist warning flags when a daily close resembles patterns of  past declines. Today’s, however, does not fit that niche.  DJIA             -.95 percent

NASDAQ     -1.46 percent

S&P500        -1.02 percent

April 2, 2012    Small Gain Drives NASDAQ Higher

Yet more significant,  in 15 of these days, prices trended higher.

March 30, 2012           Historic and Unusual, Indeed

Only six other closes, and none since mid 2003, exist with today’s pattern: the fourth drop in a row for the NASDAQ, while the DJIA and the S&P500 avoided the same outcome, finally rising after three straight drops.

More curious still, the last four of these cluster at the 2003 bottom and the early stages of the following recovery.

Finally, let’s focus also on collecting and analyzing these and other seldom seen combinations, to understand what, if any, insights they generate about price changes on the days to come.

DJIA                        .50 percent

NASDAQ       -.12 percent

S&P500            .37 percent

Apologies for the short and sometimes missing daily briefs. The flu kept after me, and often, though feeling better, the mind lagged the physical recovery.

Hope that’s all done for this flu season, and expect to return with insightful analysis as always.