September 13, 2012 Third Gain Signals a Bright Future
The Federal Reserve’s new aggressive policy to prop up the economy and the stock market’s third positive day are two bits of good news. Prices rising three days in a row occurred only 73 other days in this century. Further, as our graph illustrates, these closes happen most often when prices are moving higher.
Almost 3 percent of the closes between the 2003 bottom and the 2007 top are in this category of three successive daily advances. Similarly, more than 4 percent of the current market days, since the 2009 bottom, are in the three gains in a row category.
However, the two bear markets have just one and one-half percent of their days with three gains in a row.
That’s the good news: with bull markets in the past featuring three successive gains, we can expect prices to move higher.
The bad news is tomorrow’s prices; in the past the day following three advances in a row, typically closed lower, or did so at least half of the time.
DJIA .07 percent
NASDAQ .32 percent
S&P500 .21 percent
