August 9, 2011 Substantial Recovery
Published 10:20 Eastern, August 10
Prices jumped higher but failed to overcome yesterdays huge losses. Yet changes ranked by positive size occupied nearly the same order as yesterdays negatives.
The NASDAQ gain of 5.29 percent is the fifth largest increase since 2000 yesterdays -6.90 percent loss ranks as its eighth deepest. Similarly, the DJIA gain is its 19th greatest while the loss was the seventh worst.
Given these escalations, we believe projections by size, rather than pattern frequency, present a more useful approach. In the past, increases occurred twice as often as declines.
Yet these facts contradict the conventional wisdom that large changes in one direction are offset the next day by similar sized changes in the opposite direction. Indeed thats what happened today.
DJIA 3.98 percent
NASDAQ 5.29 percent
S&P500 4.74 percent