The Fed’s Chairman took another step back from his first announcement that the central bank planned to reduce the amount of its bond purchases. He reiterated that there is no definite plan to cut back its open market operations, saying, “I emphasize that, because our asset purchases depend on economic and financial developments, they are by no means on a preset course.”
Prices did not change much today, with the three main market averages gaining small fractions. Nevertheless, it was an up day after yesterday’s decline. This +1/-1 pattern occurs at just about the same rate –six percent- during bear markets and bull markets.
Bull markets tend to have another positive day at slightly greater rate than bear markets. However, with next day gains at 52.9 percent during expansions and 47.8 percent when prices are declining, the difference is quite slight.
Yet considering only bull markets, the magnitude of losses exceeds the size of next day gains. Our diagram shows this disparity. While the largest gain is about 3.5 percent, the deepest loss is near 5 percent. That this disproportionate negative tilt exists for every level of price change is seen by the fact that the height of the negative bars exceeds those on the plus side. (The only exception is for very small changes, where the small gains exceed the slightly smaller losses.)
DJIA .12 percent
NASDAQ .32 percent
S&P500 .28 percent
