August 9, 2012 Small Changes Continue
Small increments continue to dominate financial markets: the S&P500 added .06 percent, more or less in line with yesterday’s .04 percent gain. The DJIA and the NASDAQ posted similar sized changes.
Before concluding that these minor changes are warnings that prices are as high as they are to go before another correction dominates the future, consider some history.
As of today, both the DJIA and the S&P500 still remain far below their previous, October 2007 tops. The DJIA now stands at 92.9 percent of its previous high, while the S&P500 has recovered only 89.6 percent. Only the NASDAQ stands higher now than in 2007, at 107.4 percent of that value.
Our diagram compares the DJIA recoveries from their 2003 and 2007 lows, as of today, 862 days since their respective lows. This view indicates the current market experienced a much steeper recovery, albeit from a low near 45 percent of its previous high. The 2003 bottom fell only to two thirds of the 2000 top.
Of course numerous objections to this quantitative comparison exist. For example, the deterioration of the European financial situation, our continuing high unemployment rate are just two of the arguments that all economies, not just ours, will remain in deep slumbers until ?
Nevertheless, considering the NASDAQ advance above its previous high and the fact that the current recovery has run only 862 days compared to the 1,154 trading days of the previous upswing, the case for a slowdown remain far from a slam dunk.
DJIA -.08 percent
NASDAQ .25 percent
S&P500 .04 percent
