In this centurys 3,000+ trading days, only 157 declines are deeper than todays and whats scarier 109 are part of the last two bear markets. Our diagram reveals only nine such closes over the 2003/2007 expansion; these account for less than one percent of all trading days during that period when prices were climbing to new highs.
Yet their recurring incidence in the ongoing recovery since the last bottom of March 2009 tends to ameliorate the near obvious conclusion that the current market is heading for a correction if not a free fall. So far near four percent of the S&P500s sessions since March 2009 suffered losses worse than todays.
Further, an optimistic interpretation can focus on the timing of these recent repeats. The diagram clearly shows that they cluster at the bottom of declines. Accordingly, an equally valid but optimistic interpretation is that they reveal upcoming price increases rather than signaling further depreciation.
Clearly that has happened so far, with these substantial retreats creating uncertainty before prices recover and surpass previous intermediate highs.
This identical structure characterizes also the following day: while only 42 percent of the next day closes are higher, two-thirds happen during periods of expansion.
DJIA -1.52 percent
NASDAQ -2.19 percent
S&P500 -1.66 percent
