With the DJIA as well as the S&P500 down today, the price see-saw has now completed its seventh cycle. An event so rare, it has happened just nine times in the past 64 years, six of which took place in this century.
Our diagram shows when the S&P500 fluctuations are limited to a sequence of three days: of a loss, after a gain that follows a loss. In the past, more of these three-day down-after up-after down events occurred during bear markets.
However, these sequences are evident during bull markets as well; clearly, this current chain following just after the DJIA and the S&P500 hit new, never before seen, highs proves this point.
Yet it does raise the question whether this sequence indicates that prices have reached, or are reaching, a temporary top.
The one historical fact that implies a leveling off is that this seesaw favors declines. They occurred 3.2 percent of all days during the 2000/2003 bear market; these increased to 5.6 percent in the 2007/2009 decline.
In contrast, the current upswing has seen just 2.6 percent such closes, while the 1997/2000 bull market had only 1.4 percent. However, the proportion during the 2003/2007 surge was a non-typical 3.8 percent – a rate higher than during the 2000/2003 decline.
DJIA -.04 percent
NASDAQ -.87 percent
S&P500 -.45 percent
