USMarketView

September 14, 2012               Market Gains Continue for Fourth Day

Though prices moved higher again but far more modestly than the day before, the good news is that the chain of increases remains unbroken. And, just like yesterday’s analysis, these four gains in a row days cluster during the market’s bull phases.

The diagram shows that four up days closes happen 1.47% and .87% of the time during the 2003/2007 and the 2009/date rising price epochs. Similarly, in the two bear phases such days occur only .40% and .28% of the time.

Turning to the next day, in the past declines outnumbered gains for the DJIA and the S&P500 while the NASDAQ’s gains outnumbered losses by just 14:13.

Clearly, it would be very unusual if prices were to continue their positive run on Monday.

DJIA .40 percent

NASDAQ .89 percent

S&P500 .40 percent

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

September 12, 2012 Second Advance in a Row

While there have been 219 closes in this century where the DJIA, the NASDAQ and the S&P500 have moved higher two days in a row, today’s analysis will focus on that combination joined with the previous close of a single day loss of these three averages.

Today’s repeat is the 93^rd since January 2000. Our diagram locates these, and in addition, uses the green triangle to indicate an increase for the following day, while the red circle shows losses. These ups and downs are just about balanced between 2000 and 2009. However, since 2009, the NASDAQ and the S&P500 show advances on the next day occurring about twice as often as declines. The numbers are 14 up days and 4 down days for the NASDAQ. The S&P500 has 13 increases compared to 5 declines.

The DJIA, however, reveals an opposite situation, with just 8 gains but 10 declines.

DJIA .07 percent

NASDAQ .32 percent

S&P500 .21 percent

September 11, 2012             Third Direction Change in Three Days

Prices moved higher, following yesterday’s decline, resulting in an up-after-down pattern that has played on 213 other days in this century. The diagram locates these earlier closes and reveals these to be distributed quite distinctly over the two bear and two bull markets of the past 13 years.

While their frequency in the 2000/2003 decline was about 4.6 percent of those 740 closes, it rose to 9.3 percent during the 2007/2009 losses. Similarly, they amounted to 8.6 percent of the earlier bull market and then declined to 5.8 percent during the current expansion.

It is not clear why the second bear market had more than double the proportion as during the earlier one; nor why the current, second bull phase has only half the share of the 2003/2007 bull market.

Turning to the following day, in the past, gains and losses occurred with about the same frequency. Indeed the DJIA had 108 gains against 106 losses. The NASDAQ increases of 115 were slightly ahead of the 109 losses, while the S&P500 had 107 increases against 107 decreases.

Accordingly, we have no projection for tomorrow’s market, and for the same reason, we had none for today.

DJIA .52 percent

NASDAQ               .02 percent

S&P500                 .31 percent

September 9, 2012 Declines After Gains

All three indices fell today, after the DJIA moved higher on three successive days and two straight gains by the NASDAQ and the S&P500. This is just the third such count in the 3,190 trading days since the start of 2000.

While the last repeat occurred as recently as this past July 31, let’s focus on the earlier one that happened in February 2007. That was only 167 trading days before the market turned down decisively on October 9, 2007.

Prices continued their decline on both of the following days. Therefore, if the future is like the past, the expectation for tomorrow is for a further loss.

Friday’s projection for today, that called for a decline, turned out correct.

DJIA  -.25 percent

NASDAQ          -.95 percent

S&P500  -.39 percent

September 7, 2012                     Gains Continue

The DJIA moved higher for the third straight day, accompanied by gains for the second day in a row by the NASDAQ and S&P500. This rare pattern occurred just five other times since the beginning of 2000, with the last repeat this past July 30.

The diagram reveals three of these closes clustering at market tops of 2000 and 2007.

In the past, the DJIA and the S&P500 fell on four of the following days; the NASDAQ, however, moved higher three times, declining twice.

Yesterday’s projection for today, calling for lower prices, was incorrect.

DJIA                          .11 percent

NASDAQ                  .02 percent

S&P500                    .40 percent

September 6, 2012                                Strong Advance

The S&P500 jumped 2.50 percent, an increase exceeded only 97 times in this century. Similarly, the NASDAQ, up 2.18 percent, ranked 260^th in size since the beginning of 2000; and the DJIA’s gain of 1.90 percent stands in 165^th place in the more than 3,000 trading days in this century.

Further, today’s pattern -two gains in a row for the DJIA, and a single advance for the NASDAQ and thee S&P500- is the 21^st repeat since the beginning of 2000.

A significant fact: the average daily change of this pattern has been 2.16 percent in this century, quite close to today’s 2.18 percent. While the average for the S&P500 of 1.57 percent and for the DJIA’s 1.36 percent, are equally close to today’s large changes.

Our diagram shows ten of these closes occurring during the 2000-2003 decline, and five since the 2009 bottom.

On the following day in the past, declines outnumbered gains by a margin of 13:7.

DJIA 1.90 percent

NASDAQ 2.18 percent

S&P500         2.50 percent

Yet note this caveat: Almost all of these large gain days happened while prices were trending down — as shown for the S&P500 on the following diagram.

September 5, 2012                       Another Rare Combination

The S&P500 fell for the second day in a row, while the NASDAQ dropped after yesterday’s advance, and the DJIA moved higher after declining yesterday. This pattern has been seen just five other times in this century.

The diagram locates these closes, with the green dots indicating an advance on the following day, while the red open circle shows losses.

Note that all but two of these closes occurred at the top of the 2000 cycle, while another happened as prices continued their decline before hitting bottom in March 2003.

On the following day, in the past, prices fell three times and declined twice. However, the few observations preclude a meaningful projection for tomorrow.

DJIA                         .07 percent

NASDAQ                -.20 percent

S&P500                  -.12 percent

September 4, 2012                             Labor Day to End of Year

The DJIA and the S&P500 declined while the NASDAQ moved higher in the first session since the Labor Day Holiday.

Consider what happened to prices between Labor Day and December 31. In the past 12 years, prices declined three times and moved higher in nine other years. In five of those positive runs, gains exceeded five percent.

With this year a presidential election year, note that two of the three losing years occurred while the presidency was at stake. Those losses were substantial, amounting to -13 percent in 2000 and -29 percent in 2008.

DJIA                              -.42 percent

NASDAQ                        .26 percent

S&P500                         -.12 percent

August 31, 2012 Now and Then: The Current Cycle and the 2003/2007 Bull Market

Today’s session was the 879th trading day since the market touched the latest bottom in March 2009.

Prices so far have recovered substantially, with the NASDAQ now at 109.4 percent of its October 2007 high. The DJIA and the S&P500 have not done as well, returning only to 92 percent of their last top.

At this stage during the last, 2000/2003 bear market, the NASDAQ stood at just 44 percent of its 2000 peak, while the DJIA reached 103 percent of its previous high. The S&P500 had recovered 86 percent.

Today’s diagram, showing the closing prices of the S&P500 during the 2003/2007 recovery in black, with the current cycle in blue.

With the previous rebound lasting 1,154 trading days, prices will continue their advance if this cycle duplicates the last one, since currently we have completed only about 75 percent of that earlier tenure.

The number of direction changes is roughly equivalent for these two cycles, with the earlier one’s closes moving higher or lower 54 percent of the time. The current cycle, so far, has 50 percent.

Yet the current average daily changes exceed the earlier cycles by about 50 percent. The DJIA’s current daily change averages about .09 percent, whereas this number was only .06 percent between 2003 and 2007.