February 24, 2012 Minor Ups and Down
The DJIA losing -.01 percent today with the NASDAQ and the S&P500 notching up .23 percent and .17 percent, yields a pattern seen just 19 times in this century. However, considering the DJIAs minute, negative change, it seems foolhardy to base a projection on this smallness.
In fact, had the DJIA official close been plus .01 percent, yielding a plus two pattern for the day, then that frequency of 221 days since 2000, would yield a more reliable base for forecasting the markets future.
Further, these two different scenarios, apart by only .02 percentage points, result in substantially different scenarios. While the actual, DJIA – .01 percent change, shows twice as many gains as losses for the following day, the comparison what might have been pattern has an equal number of gains and losses.
Accordingly, the lesser risky alternative is to stand aside when projections vary to this large extent while the historical statistics show almost no difference.
One other caution the many news reports focusing on the recent closes as the highest point since 2008 fail to note that prices were in a free fall from the previous October 2007 high, not recovering till the beginning of 2009. Not a promising comparison for the many people hoping for a strong market in the future.
DJIA -.01 percent
NASDAQ .23 percent
S&P500 .17 percent