June 29, 2011 Prices Regain June 2 Levels
At the end of the third straight positive day, the market returned to prices last seen at the beginning of the month, twenty trading days ago. Todays pattern is the 227th repeat since 1950, and the 68th since the end of 1999. Further, these three-gains-in-a-row days occur more frequently when prices are tending up. They represented only 1.07 percent of all closes in the 2000/2003 decline but their share rose to 2.95 percent in the following, 2003/2007 bull market. Similarly, this combination appeared 1.41 percent of the time during the 2007/2009 decline, and then rose to 2.67 percent to date, in the current recovery.
The timing of these incidents provides a strong rationale for projecting a further increase in prices; clearly, this history is not consistent with expectations of lower prices. Yet the probability of another increase tomorrow is not high, since declines occurred more frequently than gains on the day following these three-in-a-row advances. DJIA .60 percent
NASDAQ .41 percent
S&P500 .83 percent