July 23, 2012 Two Declines in a Row
With prices falling for the second straight session, its opportune to revisit the two recent stretches of five declines in a row. Our diagram shows the price line of the S&P500 since the beginning of this century and, in red, the days when declines lasted for five or more straight days.
Its obvious that these negative runs cluster when the trend of prices is down. Not so evident are the two red dots just before, and just after the market changed direction in October 2007.
Further, the current expansion already has more of these negative-run incidents than the 2003/2007 bull market.
Moreover, just one of these negative runs happened before the end of 2011. Accordingly, with the balance of long negative runs occurring since prices hit their first top and plateau, this market requires caution.
Todays pattern of two declines after three straight advances happened just four times since 2000; prices declined twice, and rose twice, on the following day.
DJIA -.60 percent
NASDAQ -1.20 percent
S&P500 -.70 percent
