Prices slipped for two successive sessions for the third time this month. It would not be surprising if the current turmoil in Washington, combined with President Obama’s falling ratings, bear some responsibility for the market’s lack of optimism.
History shows that two down days in a row occur more frequently when the trend of prices is down; they account for 5.5 percent and 6.8 percent of all days in the last two bear markets. In contrast, while the rates for bull markets are 3.9, 5.5, and 5.3 percent, these differences are quite modest.
Yet a significant disparity exists in how far prices decline on the second successive loss day. Today’s diagram shows these days with a separate scatter for each of the last five price cycles. The median S&P500 daily losses in bear markets of -1.37 and -1.44 percent are almost twice as deep as the median losses during bull markets.
Further, with today’s losses far smaller than any of these medians –even those of bull markets- it appears that prices will remain robust; they may even accelerate once our government gets our current problems behind.
DJIA -.47 percent
NASDAQ -.28 percent
S&P500 -.38 percent
