USMarketView

Extensive losses ended the second negative day in a row. The NASDAQ’s fall of   -2.38 percent ranks as the 301^st worst, of the nearly 2,000 declines over the last five price cycles. Yet the S&P500 loss ranks even worse – its  -2.30 percent stands as the 142^nd deepest.

Considering  the magnitude of these losses further, note that the median S&P500 losses for two back-to-back declines over the last three bull markets were  -.77 percent, -.63 percent and -.98 percent –significantly smaller than today’s deep -2.30 percent.

Indeed today’s beating is harsher than the median S&P500 losses for the last two bear markets; these were just -1.37 percent and -1.44 percent

While two losses in a row are not frequent, today’s is the third happening since mid-February. Moreover, history shows a further pessimistic outlook for tomorrow. In the past, losses occurred as often as recoveries on the following day.

Today’s diagram illustrates how frequently two losses in a row have occurred over the last five price cycles. It reveals also that these happen more often during bear episodes than when prices are trending up.

DJIA                – 1.79  percent

NASDAQ       -  2.38  percent

S&P500        -  2.30  percent

After four straight advances, prices declined a bit – with the DJIA’s mark down so slight, its change came to zero percent.

As discussed yesterday, prices rising four straight days in a row occurred just 27 times over the last four price cycles since 1996, and further, the following days saw as many losses as gains.

Today’s diagram identifies these closes and indicates the direction of price changes for tomorrow. The odds for higher valuation on Monday are slightly better than even, with the DJIA and the NASDAQ history showing a ratio of 8:5 for increases.

The S&P500, as shown in the figure, though has seven gains and six losses, with twice as many declines as advances in the current, since 2009, expansion.    

DJIA                   .00  percent

NASDAQ         - .16 percent

S&P500           - .28 percent

More meaningful than the small advances that pushed the DJIA and the S&P500 to new highs is today’s fourth advances in a row. With only 36 earlier closes over the last four up-and-down price cycles, 33 occurred during expansions.

Clearly this configuration is a bull market singularity.

Our diagram plotting these days reveals none happening during the 2007/2009 bear market; we see only three while prices fell during the 2000/2003 contraction.

With the market topping new highs almost daily today’s closing pattern provides some statistical support for the view that the future will see higher prices.

As for the following day, not surprisingly declines outnumber further advances. Yes, prices fell on all the next days during the 2000/2003 decline; however, the number of advances equals the total of losing days during the three expansions.

DJIA                  .42  percent

NASDAQ          .09 percent

S&P500            .35 percent

The market’s new highs is the eye catching news, of course, but focus also on today’s gains. They are the largest one day advances since the first trading day of the year.

Yet  such increases are far from rare: 265 have occurred in this century. These account for almost eight percent of all trading days since the beginning of 2000.

Strangely enough, though, these combinations happened more often in bear markets, accounting for 12 and 13 percent in the last two major declines.

The 2003/2007 expansion rate is only 3.7 percent, while they amount to 6.4 percent of all closes since the March 2009 bottom.

Today’s pattern of three straight advance is the 75^th repeat in this century. In the past, the following day saw just about as many declines as gains.

DJIA                   .88  percent

NASDAQ         1.83 percent

S&P500           1.22 percent

Finally prices moved in the same direction two days in a row – after 13 consecutive closes when prices shifted direction from the day before.

But today’s focus is on the DJIA and its record breaking close at 14559.42. Our diagram shows its high energy growth, since mid-2011, occurring in three distinct waves. It has a distinct profile, quite unlike the value profile of the previous two bull markets.

In 2000, prices were heading down at this stage while in 2007, the market was approaching the weakness that shut down that expansion.

Can the market sustain and continue this escalation? While sharp, this growth cycle is still young; there have been 1,025 trading days since the 2009 low. The 2000 expansion ended after 1,059 days while the last bull market lasted 1,154 trading days.

DJIA                   .41  percent

NASDAQ          .48  percent

S&P500            .35  percent

Positive views remain plausible even as the seesaw persists, and now totals thirteen straight days. Consider the total  S&P500 change over this stretch of 13 days; its total advance is positive; it comes to .28 percent. Our diagram reveals how it has slowed since March 20, when the up-then-down began.

Nevertheless, these rates remains positive, and taking the .28 percent as a target, note that 38 percent of all days in this expansion had lower advance rates. Further, this proportion is near identical with the previous two expansions, when it averaged 40 percent. Finally, and in contrast, the 13 days rate of change averages for the two bear markets in this century are 62 and 68 percent.

While these data confirm a slowdown, they do not yet signal an end for this growth of values.

DJIA                   .33  percent

NASDAQ           .57  percent

S&P500             .63  percent

With the successive up and down succession now past all records, consider the impact on prices, measured by the rate of change over the last twenty days. It has fallen, for the S&P500, from 4.46 percent just seven days ago to .57 percent today.

Our diagram compares these 20-day rates of change with the S&P500 prices for each day since March 2009, when the current recovery started.

So far there have been 51 closes with 20 day rates between .57 percent and zero.  The purple open diamonds identify these and show their incidents distributed just about equally over the current upswing.

Their frequency is about the same as during the 1998/2000 bull market but slightly more than half the rate of the 2003/2007 expansion.

DJIA                   -.32  percent

NASDAQ           -.66  percent

S&P500             -.44  percent

Prices have not moved in the same direction in more than two weeks. Today’s eleventh straight change is the first since 1981, more than 8000 trading days ago.

Our diagram provides a perspective by locating the 16 days when the S&P500 changed direction on eight or more days in a row.

The last previous time this happened was eleven years ago, at the beginning of the 2007/2009 bear market. Three other down-then-up runs occurred during the earlier, 2000/2003 decline.

The good news is that otherwise, these seesaws and rising prices happen simultaneously: six incidents are  seen during the bull markets of 1998/2000 and 2003/2007.

Contrary indications though result from considering market changes after these chains of daily ups and downs: seven, or nearly half, of these happenings preceded significant price declines.

DJIA                    .38  percent

NASDAQ            .20  percent

S&P500             .40  percent

With the sequence of down then up now in its ninth straight day, our analysis has not found an historical pattern. Indeed, there are only two previous occurrences, one in 2002 and the other in 1981.

Thus, while we wonder about the meaning of this price seesaw, we propose no explanation.

DJIA                  -.76  percent

NASDAQ       -1.11  percent

S&P500        -1.05  percent

Though the up-then-down rhythm continues for the eighth day, we call your attention  to the strength of the DJIA surge. Our diagram reveals its rapid and continuous advance; our table quantifies its power relative to previous growth segments.

Further, its recent history reveals significant strengthening in the rate of its daily  price increases.

Its average daily gain is .29 percent for the last 28 days – days when it closed above 14,000. That rate is almost three times the average gain for the 152 days when the DJIA closed between 13,000 and 14,000.

The table reveals the current escalation, as measured by the average daily change, with significantly more vigor than the earlier visit to the above 12,000 level during the 2003/2007 bull market. Moreover, this latest surge has stayed at these high levels for many more days than its stay.

Despite these superlative features, we have not found, so far, historical parallels indicating an end to this amazing price escalation.

DJIA                  .61  percent

NASDAQ         .48  percent

S&P500          .52  percent