Today’s gain makes it two up days in a row – quite a difference from the up-then-down changes of the previous three days. Given that our last post, describing this past Friday’s large advance as occurring more often when prices are trending down, today’s focus is on the frequency of such strings up daily direction reversals.
Whereas it seems quite commonsensical to believe that such up-then-down sequences reveal investors’ indecision about the market’s direction, and given this bull market’s record of 1,177 days of expansion –the longest in 17 years- today’s analysis examines this conjecture.
The answer is a resounding no. Our diagram pictures the S&P500’s daily closes for each day of the last three bull markets. Whereas some of these closes cluster near the end of the 1997/2000 expansion, they are absent altogether near the next highpoint.
Moreover, as the focus on these events since 2009 shows, most of these daily reversal chains happen immediately before substantial price increases. They reveal no correlation with any future decline.
DJIA .14 percent
NASDAQ .04 percent
S&P500 . 07 percent
