The DJIA drop of -.93 percent, reversing Friday’s 1.03 percent advance, when it closed above 14000, is not at all unusual. Indeed, some 375 days in this century, when the DJIA, the NASDAQ, and the S&P500 gained more than one percent, the following closes were negative. The average change of the DJIA was -.085 percent; it was -.059 percent for the NASDAQ and -.095 percent for the S&P500.
Thus we can put to rest the headlines linking today losses to bad economic news and fearful financial outlooks.
In fact, today’s losses are in the moderate range for sessions following one percent gains. While the average DJIA change on the day following a one percent gain comes to -.085 percent, the range extends all the way from a -5.1 percent loss to a 4.7 percent gain. Similarly, the largest NASDAQ decline is -6.0 percent whit the S&P500′s deepest loss at -5.3 percent.
There is yet another sign indicating that today’s changes fit an ‘usual’ rather than an ‘unusual’ day in the stock market. Some 491 closes, of the more than 3,000 trading days in this century, have the identical pattern of a loss after a gain on the previous day. Further, the average decline on those days is almost identical to today’s. The mean DJIA decline of -.98 percent almost coincides with today’s -.93 percent. The NASDAQ average of -1.35 percent is somewhat smaller than the current -1.51 percent, as is the S&P500′s mean of -1.07 percent which is less than today’s -1.15 percent.
DJIA -.93 percent
NASDAQ -1.51 percent
S&P500 -1.15 percent