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Both the DJIA and the NASDAQ reversed direction again, more than recovering yesterday’s losses. The NASDAQ, however, fell for the second day in a row. This combination has been seen only 35 other times in this century. Though prices on the following day split almost evenly between gains and losses, our diagram shows that declines outnumbered increases two to one during the last two bear markets. Losses occurred slightly fewer times than next day gains when the trend of prices was up between 2003/2007 and since the low point of 2009.

The magnitude of next day losses deserve a note of caution: they’re extremes ran from minus 2.0 to minus 4.5 percent, in good times and bad.

Overall, regardless of the daily frequency tabulation, since the beginning of 2000 the NASDAQ declined 207 times while the DJIA and the S&P500 averages moved higher. These days accounted for about six percent of all closes; they were distributed almost equally over each of these four market phases.

Yet on the following day, the S&P500 increased 66 percent of the time in the 2009/date period, and 53 percent of the time between 2003 and 2007. But during the bear markets, this index moved in the opposite direction, with higher prices accounting for only 35 percent of closes between 2000 and 2003, and an even smaller 29 percent during the 2007/2009 decline.

DJIA                               .34 percent

NASDAQ                      -.17 percent

S&P500                         .16 percent

Prices remained on their see-saw, posting losses following Friday’s gains. The down after an up day configuration, though is not uncommon: today’s is the 492^nd repeat over the more than 3,300 trading days in this century. What is rare, however, is the near zero percent change price change from the day before.

There have been just three previous days with changes this negligible. These happened in October 2004, November 2006 and June 2011. Our diagram reveals that these minor daily changes preceded a major prices decline only once, and that was in 2011. Values appreciated quite sharply, however, after the two earlier incidents. These advances, moreover, extended for many days.

The recent breakthroughs by these three indices to levels seldom seen before deserve attention. Yet their current prices seem modest compared to their levels at the last, October 2007 market top. Yes, the NASDAQ now stands at 113.5 percent of that high, but it remains substantially below its all time, dotcom high. However, the DJIA has recovered only 98.6 percent of its 2007 top while the S&P500 remains at 96.9 percent.

DJIA                      -.16 percent

NASDAQ              -.06 percent

S&P500                -.06 percent

The market moved higher after yesterday’s losses, continuing the almost daily direction changes. The DJIA, the NASDAQ and the S&P500 have now accumulated four changes in the last five days. The combined pattern of today and yesterday -the DJIA and the S&P500 up after declining the day before, the NASDAQ up following two declines in a row- has happened just 10 previous times in this century.

The diagram showing their dispersion reveals these dispersed equally over the past two expansions and declines. Yet during the bull markets, prices moved higher on four of the following five days, whereas prices in the bear markets have the exact opposite signs, with four declines and only one increase.

Note that yesterday’s projection for today was incorrect; prices moved higher despite the record showing that declines outnumbered gains two to one following yesterday’s pattern.

DJIA                               .35 percent

NASDAQ                        .91 percent

S&P500                         .57 percent

The NASDAQ fell for the second day in a row whereas the DJIA and the S&P500 declined after yesterday’s gains. Today is the 36^th repeat of this uncommon pattern since the beginning of the century. Unlike many patterns of recent days, this combination repeats nearly three times as often during declines as when prices are moving higher.

As a result the outlook for the following day is negative. Our diagram reveals declines outnumbering increases three to one during the 2000/2003 declines; the ratio becomes more favorable in the 2007/2009 bear market, but decreases still outnumber gains 4:3. The negative tilt endures even while the market is bullish; prices falling on the next day more often than they increase.

Yet the last repeat of this pattern on January 31 –just five trading days ago- preceded a resonant market, with the DJIA shooting up beyond 14000 while the S&P500 traded above 1500.

DJIA                                 -.30 percent

NASDAQ                           -.11 percent

S&P500                            -.18 percent

The S&P500′s gain of a mere .05 percent could be a early warning that prices are at or near the top of this current bull market. Our diagram shows that 11 such closes happened in the fifty days before the market’s peak of October 2007. Similarly, 6 of these small upticks took place in the fifty days before the 2000 top.

That these small changes happen infrequently is demonstrated by the fact that only 94 of the 1,738 positive closes since the beginning of the century are in this zero to plus .05 percent range. That comes to just 5 percent or once every twenty trading days.

With six of these small, less than .05 percent gains, occurring in the 100 days before before the 2007 top, their frequency comes to 6 percent. While that’s not a lot more, it nevertheless is 20 percent more than the average rate over the last 13 years.

The comparison becomes more forbidding when using both gains and losses in the .05 percent range. In total, these occurred 165 times over the 3,289 closes in this century. But these happened 11 times in the 100 days before the market’s 2007 top, a frequency of 11 percent, more than double the average ratio.

DJIA                 .05 percent

NASDAQ        -.10 percent

S&P500         -.05 percent

The DJIA, NASDAQ and S&P500 moved higher following yesterday’s losses which, in turn, came after increases the day before. This chain of Up, After Down, After Up has happened just 87 other times in this century. These occurred more often during market declines than when prices were moving higher. Yet the disparity is not large: 3.1 percent of all closes during the 2000/2003 and 2007/2009 declines, compared to 2.4 percent of the days since 2009 and 2003/2007.

On the following day, prices declined 62 percent of the time during the two contractions while the declines amounted to only 48 percent of the days in the two expansions.

The diagram of the S&P500 locates these days; it reveals that many of the next day declines cluster around turning points. That permits a positive outlook for the future -since today’s combination is the first since June 2012- if changes in price trends happen only after a string of these Up, After Down, After Up days.  

DJIA                   .65 percent

NASDAQ          1.23 percent

S&P500             .98 percent

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

For only the tenth time in its entire history the DJIA moved beyond the 14000 mark. Of course this creates tremedous exhiliration. But – the but being that these previous closes above 14000 occurred at the last market top, back in 2007. Indeed, its very highest close – 14164.53 – came at the very top, October 9,2007.

Thus we raise the same caution as a few days ago, when the S&P500 closed above 1500 for the first time ever.

DJIA                                     1.08 percent

NASDAQ                              1.18 percent

S&P500                                1.01 percent