September 12, 2011 Recovery Starts Week
Moderate price increases ruled the day after the tenth anniversary of 9/11. Nor did the worsening forecasts of the Euro and the deeper government debt problems of Greece and Italy push the market into the red. It was the first advance in three days, resulting in a +1/-2/+1 pattern. History shows this arrangement has 32 previous closes in this century.
The diagram locates these days and shows that they are more frequent when prices are rising. This news means that todays pattern is a bull market signal. Yet, given the remarkable volatility of prices, and previous days patterns associated with bear markets, caution and uncertainty rather than optimism should be the rule of the day.
Todays illustration also provides insights for expectations of tomorrows results. The green circles identify gains, while the red circles show declines, on the next day. Overall, 21 of the following days had price increases. Further 14 of those came while prices trended higher.
Note that Fridays projection correctly anticipated todays increases.
DJIA .63 percent
NASDAQ 1.10 percent
S&P500 .70 percent