We’ve seen today’s pattern twice before this year: on August 6 and June 11. Both happened after a run of positive closes. In June, it came after three successive gains, while the August repeat followed five positive up days. Similarly, the present repeat caps four up days in a row.
We map these as well as the other, some fifty, occasions when the DJIA and the S&P500 turned down two days in a row and the NASDAQ fell just one day. Note that the majority of these closes happened during bull markets, but as our previous posts of June and August discussed, quite a few cluster near turning points.
Consider the March 2000 market top, when today’s pattern appeared 69 and 55 days before prices turned down.
We see this combination first 49 days prior to the October 2007 turning point, then three days before and a few days after prices started their long, nearly two year long, decline.
Accordingly, the frequency count of this combination happening most often during price expansion yields a favorable outlook. This is offset though by the many incidents near bull market peaks.
DJIA -1.10 percent
NASDAQ -.38 percent
S&P500 -.72 percent
