USMarketView

With prices moving higher for the second day in a row, consider the recent path of the S&P500.  This market continues in roughly the same place for the last ten or so trading days.  The diagram  shows this pause, as well as a previous suspension late in 2013, that lasted about twenty days, before prices resumed their upward path.

With this bull market in its 1,221^st day, while the previous two lasted just 1,059 and 1,153 trading days, caution may well be in order.

DJIA                    .66 percent

NASDAQ              .76 percent

S&P500               .52 percent

The week opened with the market moving higher after giving up more than one percent in the previous session. Nevertheless, the size of today’s gains occur more frequently during bear markets.  The diagram shows that the proportion of closes with changes this large account for about 13 percent of all  days during the last two bear markets.  The  frequency during bull markets ranges between five  and eight percent.

As for the following day, losses out number gains in bear as well as bull markets, with prices moving higher only one of every three days.

DJIA                     .71 percent

NASDAQ           1.69 percent

S&P500             1.08 percent

With all three averages losing more than one percent today, the market experienced its worst day since October. And there is more bad news – the DJIA posted its fourth loss in a row.  Further, looking ahead to tomorrow, the record shows prices declining more often than they recovered on the following day. Our diagram plots these facts, distinguishing between the current and the previous two bull markets.

The frequency of the  DJIA, the NASDAQ, and the S&P500 each losing more than one percent is far greater when prices trend down.  This happened 20 and 25 percent of the time in the last two bear markets; the comparable rate ranges from 6 to 9 percent during bull markets.

DJIA            -1.09 percent

NASDAQ      -1.47 percent

S&P500       -1.26 percent

Our focus on the NASDAQ continues.

The NASDAQ index is now valued at 329 percent of its low on March 9, 2009, a substantial advantage over the DJIA gain of 253 percent.  The S&P500 also lags the NASDAQ - and at 273 percent of its bear market low – it’s performance is only slightly better than the DJIA.

Note that most of the NASDAQ’s superior performance is recent, with its relative gains accelerating in 2012 and 2013.

As a point of interest, note that today’s pattern is unique.  It is the first time since 1950 that the market closed with two up days in a row for the S&P500, combined with the one day gain of the NASDAQ and the third down day in a row by the DJIA,

DJIA         -.05 percent

NASDAQ   .44 percent

S&P500     .23 percent

The S&P500 moved higher after yesterday’s loss, while the NASDAQ fell after yesterday’s uptick and the DJIA declined for the second day in a row.  This combination occurred just twice since early 1996 – some 4,527 trading days ago.

Today’s diagram reveals these earlier closes happening while there was a pause in the market’s flow, and that shortly thereafter that prices continued their move without changing direction.

DJIA                -.11 percent

NASDAQ        -.23 percent

S&P500           .03  percent

With The NASDAQ continuing to outperform the general market, we compare its performance to the S&P500.  Our diagram plotting the ratio of NASDAQ to S&P500 prices reveals its recent acceleration. It is now at its highest level since the dot-com surge that preceded the 2000 market top. Indeed the NASDAQ has led this market’s increases from its 2009 low.

DJIA               -.41 percent

NASDAQ          .30  percent

S&P500         -.02  percent

The NASDAQ and the S&P500 declined for the third straight trading day, posting losses for  every day in  the new year.  Generally, January trades in narrow bands.   Consider the record since the 2009 low point: price changes, as measured by the S&P500 averaged just .10 percent during the first month of the year.  The comparable numbers for the 1997/2000 expansion is .13 percent, and just .04 percent in the 2003/2007 bull market

The comparable bear market numbers are -.01 percent for the 2000/2003 decline, but a much deeper loss of  -.35 percent in the 2007/2009 decline.

Today’s diagram shows the divergence of daily price changes for the entire month of January. It summarizing these rates for expansions and declines.  It reveals that bull markets experience a much narrower band of daily changes than bear markets.   

In bad times, they ranged from losses as deep as  -5.3 percent to gains as high of plus 5.0 percent;  while the comparable changes were -3.8 percent and plus 4.4 percent in bull markets.

Accordingly, the persistence of small daily changes in January is consistent with expectations of further price advaces.

DJIA               -.27 percent

NASDAQ       -.44 percent

S&P500         -.25  percent