USMarketView

 

 

Unsurprisingly security prices followed the Ten Year T-Bill rate –this should not be a surprise since asset values decline as interest rates increase.  Further, with the continuing focus on the Fed’s future policy surely intensified as a new chief takes the reigns next month,  these uncertainties are bound to produce the motivation for safety that lead to  selling.

The NASDAQ went against the tide but by just a bit; it added .02 percent today, while the DJIA and the S&P500 posted losses for the fourth day in a row.  This is a first for this combination; thus without an available precedent today’s focus, by necessity, is on closes of four successive losses.

Using this diagram, we see that this pattern of four straight declines is rare; that it occurs as often in declining as in rising markets.  Yet, on the following day, prices moved up more often than they declined.

One additional curiosity is this combination occurring before market turning points: just four days before the market reached bottom in March 2009, and two days after peaking in March 2000.

 

DJIA         -.16 percent

NASDAQ    .02 percent

S&P500    -.13 percent

 

 

 

 

 

 

 

 

 

 

The third loss in a row after small advances follows the rise of the interest rate of the Ten Year Treasury debt.  Today’s diagram plots the inverse or ‘value’ of the market rate for this benchmark security.  It is revealing how effective the rise in the interest rate –shown by its inverse, or dollar value, of the then year rate- has put the brakes the current bull market.  And not just now – we see this as the third recent replay of the higher interest rates-lower security values combinations that occurred this past August, September, and October.

Yet we see a positive outlook in today’s closing pattern of the DJIA and S&P500 three losses in a row, combined with two straight declines of the NASDAQ.  This is a bull market pattern since 17 of the last 21 occurrences came during bull markets.

However, the outlook for tomorrow is dim: in the past prices moved higher on nine days, they declined twelve times.

 

DJIA               -.59 percent

NASDAQ        -.20 percent

S&P500          -.32 percent

 

 

The volatility of daily price changes in December tends to be larger than during January-to-November.  During the last 13 years, the S&P500 average December daily price change comes to .08 percent, while the average rate of the January-to-November months is only .03 percent.

There is an even larger disparity when comparing these changes individually for bull and bear markets.  The December average daily change during expansions comes to .12 percent; it is only .08 during the earlier months.  In bear markets, however, the reverse is true.  The December mean daily change is only -.03 percent, while    it    is more than four times larger, some -.13 percent, throughout the earlier eleven month period when prices are declining.

The diagram plots these daily percentage changes, using a large yellow circle to designate the December days; the smaller black dots show the daily changes during January through the end of November.  The vertical lines separate bull markets from bear phases.

Today’s pattern of two losing days for the DJIA and the S&P500 while the NASDAQ declined one day occurred 53 times since 1996.  These occurred more often in bull markets than when prices were heading down.  On the following day, prices moved higher 30 times and fell on 23 days.

 

DJIA               -.40 percent

NASDAQ         -.29 percent

S&P500          -.17 percent