Prices fell sharply, with the NASDAQ off -1.53 percent, the S&P500 down -1.24 percent, and the DJIA losing just -.78 percent. Surely this reversal is unpleasant in the light of the recent price accelerations. Yet because there have been nearly 500 declines this sharp in this century, with more occurring during rising markets, todays fall off should not in and of itself signal declines are ahead.
In fact, these large falloffs happen far more often during bull markets than bear markets! While there were 50 during the 2000/2003 decline, accounting for 6.8 percent of all closes, they accounted for 21.8 percent of all closes in the following expansion. Similarly the next bear market from 2007/2009 had 34, or 9.6 percent, days with these fall offs whereas so far in the present expansion they amount to 15.2 percent.
The outlook for tomorrow, however, remains unclear. In the past, prices moved higher 61 percent of the time during the 2003/2007 increase, but that ratio is only 52 percent in the days since March 2009 bottom. These proportions are 42 and 65 percent, respectively, for the two earlier bear phases.
For the record, yesterdays projection was correct in seeing losses for today.
DJIA -.78 percent
NASDAQ -1.53 percent
S&P500 -1.24 percent