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The NASDAQ reversed field again, moving higher, while the DJIA and the S&P500 increased for the second straight day. While today is the 19^th repeat of this pattern in the past 13 years, these present widely different circumstances. Five days occurred in the 2000/2003 decline. These averaged about 2 percent for the DJIA and the S&P500 while the NASDAQ’s mean gain was over three percent. Yet the two occasions in the 2007/2009 slump were less than one half a percent.

The gains of the other eleven, during each of the two bull markets, however, are identical. The NASDAQ average increase is 1.0 percent per day, whereas both the DJIA and the S&P500 are at .8 percent.

Turning to tomorrow, in the past both the DJIA and the S&P500 moved up as often as they declined, whereas the NASDAQ fell eight times and moved higher on just four sessions. Moreover, during the current, since March 2009 expansion, losses outnumbered gains 3:1 for the DJIA and the S&P500; the NASDAQ failed to post a single gain.

DJIA                                                   .83  percent

NASDAQ                                            .81  percent

S&P500                                              .79  percent

We divide today’s comments into the long run and the next day.

The Long Run

We express concern on the failure of the NASDAQ to extend its positive streak to seven days in a row. The diagram reveals that most of these days occur when prices are about to decline. There are four at the 2007 top; two just before, and at the start, of the 2000/2003 bear market; while the current expansion experienced seven already. In sum, whereas the NASDSAQ has 35 strings of six gains in a row with 19 extending to a seventh straight increase, the balance occurred before market reversals. Therein lies our unease.

Tomorrow

The second straight losses of the DJIA and the S&P500 combined with the NASDAQ’s decline, yields a pattern seen 34 other times since the turn of the century. In the past, prices the following day moved higher 21 times for the DJIA and the S&P500; they increased on 19 days for the NASDAQ. This record justifies projecting gains for tomorrow.

DJIA                                                   -.69  percent

NASDAQ                                            -.30  percent

S&P500                                              -.52  percent

The NASDAQ continued higher, scoring its sixth gain in a row, but the S&P500 closed lower, ending its positive streak at five days. The DJIA declined after posting two straight advances.

Yet the changes were modest.  The NASDAQ’s increase ranks as the 1,311^th of the more than 1,700 positive closes in this century. Similarly, the S&P500 loss of -.20 percent stands in the 1,222^th        place of the 1,532 declines since 2000.

The past has good news for tomorrow: prices moved higher on the following day for each of these three averages, with the NASDAQ and the S&P500 posting seven gains and only one decline. The DJIA moved higher on six days.

Further today’s pattern occurs most often in bull phases – seven of the last eight repeats took place during the 2003/2007 and the 2007/2009 growth periods. In addition, our diagram reveals only two happening during market corrections; prices were increasing the other six times.

DJIA                                                   -.33  percent

NASDAQ                                             .33  percent

S&P500                                              -.20  percent

November 23, 2012         Strong Market Follows Thanksgiving Day

Prices surged, with the NASDAQ and the S&P500 posting their fifth straight advance and the DJIA moving higher for the second straight day. These gains following Monday’s swell, closed a strong week; they point toward continued growth of the current expansion.

Though Monday’s increases were larger, gains exceeding today’s -the NASDAQ up 1.38 percent, the DJIA up 1.34 percent and the S&P500 plus 1.29 percent- happened only six other times this year. In fact, just 235 other closes surpassed this performance in the 3,241 trading days in this century.

But beware: the cluster of large advances accompanies falling price trends! Our projection of further gains results from the fact that only 7.3 percent of the days since the 2009 recovery posted gains as large.

The 2007/2009 decline had twice as many -nearly 14 percent of all closes- large increases, while the 2000/2003 drop had 10.5 percent.

In contrast, they accounted for just 2.8 percent of the days during the last, 2007/2009 bull market.

Our diagram details these facts.

As for Monday’s prices, in the past the day following this pattern saw declines slightly more often than increases.

Further, there have been no discernible price changes in the sessions before and after Thanksgiving Day.

DJIA                                                   1.35  percent

NASDAQ                                            1.38  percent

S&P500                                              1.30  percent

Prices remained near yesterday’s closes, consistent with past ‘following day’ patterns after large advances.

Losses should be expected tomorrow: previously declines outnumbered gains 14:8

DJIA                                                   -.06  percent

NASDAQ                                             .02  percent

S&P500                                               .07  percent

Large gains plus the second advance in a row awakened a market that had cobbled just minor changes in recent days. With the NASDAQ’s plus 2.21 percent leading the way, the S&P500 added 1.99 percent and the DJIA gained 1.65 percent. Not many sessions performed this well; indeed, only 195 of the 15,000 trading days since 1950 achieved better gains.

That this happened while the market closed higher for the second day in a row, yields an even rarer tally: there are just 30 such closes since 1950, with 19 in this century.

However, our diagram identifying these days also reveals  12 happening during bear markets! Yet all of the four since the 2009 bottom moved higher on the following day.

Further, even the bear market incidents show an optimistic outlook, with almost all clustering just before prices began the long recoveries of 2003 and 2009.

DJIA                                                   1.65  percent

NASDAQ                                            2.21  percent

S&P500                                              1.99  percent

With prices now experiencing their second pause, it’s worthwhile to review the record. We’ve assembled the history of the on-going, since 2009, expansion and also that of the 2003/2007 and the earlier, 1998/2000 bull markets.

In term of age, the current market has trended higher for 930 trading days, while withstanding several reversals. Thus we can judge it young compared to the 1,154 days of the 2003/2007 period, or conclude that it is due for a reversal based on the previous, 395 day long 1998/2000 experience.

Our diagrams showing these three expansions support the view that the earlier, shorter period does not parallel the current market; then prices climbed more steeply than in the later periods. We know also that internet/computer technology and expectations pushed prices up more rapidly than the market could sustain.

Accordingly, the current expansion is relatively young.

Further, the closing price diagrams of the NASDAQ and of the S&P500 show many similarities of price increases and price decreases, for the current and previous expansion; they are, moreover, far different than the 1998/2000 experiences.

There is a caution though to temper this positive outlook. Namely that today’s prices are double those of the 2009 trough. The NASDAQ now stands at 225 percent of its 2009 low, while it reached just 220 percent at the end of the 2007 expansion. Similarly, the S&P500 is at 201 percent compared to 195 percent in 2007.

DJIA                                                    .37  percent

NASDAQ                                             .57  percent

S&P500                                               .48  percent

The record shows just two days since 1950 when the DJIA and the NASDAQ, accompanied with the S&P500’s third successive losses fell four days in a row. These occurred shortly after the 2000 and 2008 presidential elections. They happened on the seventh day following these elections, identical to today’s count, seven trading days after November 6.

The diagram identifying these closes also includes the results following the 2004 vote. In that year prices of these three averages moved up on both the seventh and eighth day after the election.

Yet while these three prior events are identical election wise, they fail to share much else. In 2000, prices were just at the beginning of the slide that would end only three years later. In 2004, the market was halfway between that bottom and the recovery which peaked at the end of 2007. The 2008 ballot occurred just four months before prices started the rise which continues, so far, till today.

While the three closes share the election dimension, they possess little else in common that supports a projection of future prices.

DJIA                                                    -.16  percent

NASDAQ                                             -.23  percent

S&P500                                               -.35  percent

Prices declined again, as the DJIA and the NASDAQ fell for the fifth time in the last six days. Yet before blaming the fiscal cliff fad and selling out, consider the following: price drops are far from unusual after presidential elections. That includes Democrats, Republicans, incumbents or successful challengers.

Losses are sharpest for the NASDAQ; these declined an average of  -.33 percent in the first five days after presidential elections since 1952. This century’s post-election losses are even steeper, averaging -1.05 percent for these days.

Fortunately, the negative impact declines as Election Day recedes. The NASDAQ daily loss comes to -.88 percent for days six through ten; it falls even more to average   -.39 percent in days eleven through fifteen.

The DJIA and the S&P500 suffer parallel losses, though their declines are not as deep.

Before shrugging off these latest losses, though, consider the other fundamentals of recent days –uncertain tax and deficit policy revisions, mounting discord and violence studded European demonstrations- before putting these post-presidential in a curiosity box.

DJIA                                                    -.46  percent

NASDAQ                                             -.70  percent

S&P500                                               -.40  percent