Prices dropped sharply, with the S&P500 giving back yesterday’s entire gain. The NASDAQ loss was even deeper, giving back -1.84 percent after adding 1.50 percent the day before.
At the closing bell, the DJIA was off -.94 percent, the NASDAQ fell -1.84 percent while the S&P500 lost -1.43 percent. While deep, these declines are not that rare. The last five up-and-down price cycles have seen 315 days with losses this deep and deeper, amounting to about 10 percent, or one of every 10 trading days.
These deep losses occurred far more often during price declines than when prices were trending up. They amounted to 20 percent of all closes during the 2007/2009 decline, and 14 percent when prices fell between 2000 and 2003.
In contrast, such losses came to 2.4 percent in the 2003/2007 bull market and 4.9 percent in the previous recovery. Indeed, while that rate has risen to almost 6 percent since the last, 2009 bottom, it nevertheless remains far below the double-digit numbers experienced during the previous market declines.
Though analysts are refreshing fears of an impending market top –and these are logical with prices at all-time highs- so far, at least, this record remains consistent with the profile of a bull market.
As for tomorrow, in the past, prices have risen the day following losses as deep as today’s more often than they declined. Further, these gains happened even during bear markets.
One final thought: earlier we had a stream of up and down days; these continued for more than two weeks but prices changes were quite small. Now, over the past three days, the market has revealed moves that could parallel those previous seesaw days but with substantial price instability.
DJIA -.94 percent
NASDAQ -1.84 percent
S&P500 -1.43 percent
