The week closed with the DJIA moving higher for the third straight session while the NASDAQ and the S&P500 declined. It was the first reversal for the NASDAQ after three consecutive advances, and the first decline, after four increases in a row for the S&P500. The resulting pattern happened only 14 previous times in this century, and a total of 33 since 1950.
Further, note another oddity relevant for the future: eight of these last 14 closes occurred since the March 2009 bottom, with four clustered in 2011 and three so far since January.
Price increases dominate the following day, with the NASDAQ and the S&P500 moving higher 11 times, declining on only three next-day sessions. These gains are bunched also in the past three years.
We focus on a further, final point: today, as often in 2009, the frequency count of these three averages is different. So far, in the 191 trading days of 2012, the DJIA, the NASDAQ and the S&P500 have closed with the same pattern count just 48 times, or on about one day out of four.
This is far below the historical record of 50 percent, or one day out of two.
Our diagram plots these daily frequencies, using red to indicate different daily patterns, and green when these three averages close with identical patterns. Note how these red, different patterns, dominate the 2000/2003 bear market. We see this also, to a lesser extent, during the 2007/2009 decline.
Further, as our recent blogs have mentioned, recent closes also show this trend yet despite this evidence, prices continue higher.
DJIA .26 percent
NASDAQ -.42 percent
S&P500 -.03 percent
