USMarketView

August 15, 2012                            Just 22 Previous Closes

The DJIA lost just -.06 percent while the NASDAQ and the S&P500 moved a bit higher. This combination is another incident of the growing number of days closing with patterns rarely seen before. Today’s has just 26 precedents, with 22 coming in this century.

Further, this pattern has a unique distribution: none occurred in the seven years between 2002 and 2009. Indeed 17 of these 22 happened since the beginning of this recovery on March 2009.

So far our analysis has not succeeded in linking this, and other similarly rare patterns with future price changes. Since this linkage is the primary motivation of our efforts, we are disappointed but not discouraged.

As for prices tomorrow, in the past 13 of the following days posted gains.

DJIA                                  -.06 percent

NASDAQ                           .46 percent

S&P500                              .11 percent

August 14, 2012                      Another Rare Pattern

The market continues posting unusual patterns: today’s DJIA gain, the NASDAQ loss and the second decline of the S&P500 occurred only five other days in this century. Prices on the following day moved higher as often as they declined.

Here’s a bit of history: of the more than 3,000 sessions since the beginning of 2000, these three averages moved up or moved down less than half the time. There were 832 days when all three moved higher and 728 closes when all three declined.

Further, two-thirds of the all-three-positive days came during bull markets while 62 percent of the all-three-negative days occurred while the trend of prices was down.

DJIA                              .02 percent

NASDAQ                     -.18 percent

S&P500                       -.01 percent

August 13, 2012       Diverse Changes: What Do They Mean?

The focus of our analysis is on three indices: the DJIA, NASDAQ and the S&P500. Most of the time, they change in the same direction, and with the same frequency. Today, however, each of these marched to a different tune. The S&P500 declined, the DJIA closed lower for the second day in a row, whilethe NASDAQ moved higher for the third straight day.

This pattern happened just three other times since 1950: in 1974, 1975 and 1985.

Further, yesterday’s pattern and the day’s before were even more infrequent, occurring just twice, in 1972 and 1995.

While we have not discovered a relationship between these infrequencies and future prices, an alert is warranted.

DJIA                               -.29 percent

NASDAQ                         .05 percent

S&P500                          -.13 percent

August 10, 2012                                            Unusual Patterns Continue

Here we have another instant of a closing pattern seen just twice before in the 62 year span of our data base. It is identical, except for the raw count, to yesterday’s combination of price changes. A further oddity is that these two ‘only previous occasions’ happened in 1972 and 1995, 40 and 17 years ago.

We show the S&P500 closing prices for these two incidents in separate diagrams. Whereas prices fell sharply, but nor for long in 1972, they continued higher without much of a pause in 1995.

While we noted before, that instances this rare fail to provide a basis for projecting future prices, note notice that recent closes display uncommon dimensions. That is a strange occurrence indeed: the fact that the market is providing a cluster of uncharacteristic closing patterns.

DJIA                                     .32 percent

NASDAQ                              .07 percent

S&P500                                .22 percent

August 9, 2012                           Small Changes Continue

Small increments continue to dominate financial markets: the S&P500 added .06 percent, more or less in line with yesterday’s .04 percent gain. The DJIA and the NASDAQ posted similar sized changes.

Before concluding that these minor changes are warnings that prices are as high as they are to go before another correction dominates the future, consider some history.

As of today, both the DJIA and the S&P500 still remain far below their previous, October 2007 tops. The DJIA now stands at 92.9 percent of its previous high, while the S&P500 has recovered only 89.6 percent. Only the NASDAQ stands higher now than in 2007, at 107.4 percent of that value.

Our diagram compares the DJIA recoveries from their 2003 and 2007 lows, as of today, 862 days since their respective lows. This view indicates the current market experienced a much steeper recovery, albeit from a low near 45 percent of its previous high. The 2003 bottom fell only to two thirds of the 2000 top.

Of course numerous objections to this quantitative comparison exist. For example, the deterioration of the European financial situation, our continuing high unemployment rate are just two of the arguments that all economies, not just ours, will remain in deep slumbers until …?

Nevertheless, considering the NASDAQ advance above its previous high and the fact that the current recovery has run only 862 days compared to the 1,154 trading days of the previous upswing, the case for a slowdown remain far from a slam dunk.

DJIA                          -.08 percent

NASDAQ                    .25 percent

S&P500                      .04 percent 

August 8, 2012             A Mixed, Small Change Day

While the NASDAQ declined, the DJIA and the S&P500 advanced. Yet the changes were not very different from zero. The DJIA’s change was just plus .05 percent, a number so small that only 106 other gains in the past 13 years were smaller. Similarly, the S&P500′s plus .06 percent has just 112 smaller increases since January 2000.

Finally, today’s pattern of four gains -the DJIA and the S&P500, with the NASDAQ declining after three previous advances- is unusual, with just seven other closes in this century.

Accordingly, these rare occurrences do not provide a basis for projections of future price changes.

DJIA .05 percent

NASDAQ -.15 percent

S&P500 .06 percent

August 7, 2012             Third Gain in a Row

Like a mirror image of last week’s string of losses, the market closed higher for the third straight day. Just 232 other such closes exist in the near 16,000 trading days since 1950. Today’s is the 74th repeat in this century.

Our diagram showing these closes reveals that most – more than 80 percent- occurred during the two upturns. Thus implying a continuing sequence of higher prices – in other words, a bull market.

Yet projecting these data to tomorrow reveals chances almost equal for another positive day or for a decline.

DJIA .39 percent

NASDAQ               .87 percent

S&P500                 .51 percent

 August 6, 2012                         Second Advance

Prices moved higher for the second straight session, a pattern that has occurred 217 times since the beginning of 2000. However, only three of these closes followed four straight declines -which is our situation today. The diagram identifies these with a red vertical line.

Yet, the many observations -the 217 points- fail to yield any insights as to (1) whether this pattern helps to identify the market’s direction, and (2)  whether prices will rise or fall  on the following day.

As for direction,  this pattern accounts for 5.5% of all closes in the first downturn but 7.9% of the days in the second downturn. Similarly, the first bull market has 8.4% of this pattern whereas the current phase comes in with just 5.8% so far.

Turning to tomorrow, we see that while prices fell about twice as often as they increased on the following day, they nevertheless have too much variance to provide reliable projections.

Finally, turning to the three closes that occurred after four declines in a row, we fail to find clues as to their place or their next day results.

DJIA                      .16 percent

NASDAQ         .74 percent

S&P500                 .23 percent

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August 3, 2012             Gain after Four Losses

Prices jumped near two percent, as the week of daily losses closed. Our diagram identifies the 11 previous closes with the same pattern of +1/-4 performance. The numbers along the bottom of the graph indicate the changes of the S&P500 on the following day.

Only four continued higher while the other seven days returned to losses.

DJIA                    1.69 percent

NASDAQ             2.00 percent

S&P500               1.90 percent