Small declines ended the month – and happened the day before the legislated draconian sequester is to take effect. Perhaps the market consensus is thats no big deal though it nevertheless just flirted with highs never seen before. Well have to wait before see if this fiscal brake on the economy will become a non-event.
Todays price profile leaves several choices of analysis. A simple decline of the DJIA, the NASDAQ and the S&P500 is common, with near 500 previous happenings in the past 13 years. It is rarer after two successive advances; that count is 87. We focus on one further step into the past considering the 34 cases when this occurred after an earlier loss.
The diagram reveals that prices on the following day show no consistency of direction. Though further losses occurred on the last four repeats of this pattern. Yet a similar string of replications during the 2003/2007 expansion led to a sequence of gains.
Finally, losses continued on the next day after the last time we had this pattern. But this may not be a meaningful forecaster since prices fell more than two percent then, much further than todays minor correction.
On sequences like these, discretion wins out over projection.
DJIA -.15 percent
NASDAQ -.07 percent
S&P500 -.09 percent
