USMarketView

Prices declined almost one percent after hitting new highs two days in a row. History shows this loss is not unusual; indeed prices fell on the following days after the highs of 2000 and 2007.

The diagram shows the changes in the S&P500 for the first fifteen days after this index hit their previous record highs.

Those losses, though, were quite smaller.  The S&P500 change was  -.24 percent in 2000; it declined just -.17 percent in 2007. Today’s price is .93 percent lower than the day before – the day prices reached a new peak.

There is a distinct difference, however, between those earlier highs and today. Namely, prices declined thereafter; they never returned to regain or pass their previous highs.

The current market may well show more strength; rather than further declines –as in 2000 and 2007, 2013 may yet generate higher prices than the April 30 top.

Yesterday’s declines may be temporary, and the record shows losses after new highs as typical, not unusual.

DJIA              -.94 percent

NASDAQ         -.89 percent

S&P500          -.93 percent

The beat goes on, as the DJIA, the NASDAQ, and the S&P500 continued to new highs for the second straight day.

Our diagram presents the last three episodes when the S&P500 closed above 1,300. It shows that the current price expansion, that began in March 2009, is smoother and with fewer price reversals than the two earlier periods.

Note that each of the two previous runs above 1,300 ended and prices dropped. Further, these reversals lasted for hundreds of trading days.

Moreover, the two earlier run-ups experienced significant reactions before continuing their growth and setting new record highs.

So far, the present period of increasing values has not met such resistance – and has continued to make substantial gains over the last hundred trading days.

DJIA                .14 percent

NASDAQ          .66 percent

S&P500           .25 percent