New highs continue for the DJIA and the S&P500 – though their recent step-ups -ups are minute. These two averages moved slightly higher for the second day in a row, while the NASDAQ posted a moderate decline. This closing pattern happened just 42 times in the 4,625 trading days of the last five major market trends. That total comes to less than one percent of all trading days.
Yet these closes happen about twice as frequently when prices are trending down. This preponderance is very evident in today’s diagram: the frequency in the current expansion of just .53 percent is about a third of the 1.69 percent level of the previous, 2007/2009 bear market.
However it is inappropriate to consider today’s pattern as signaling a top and subsequent declines for the current market. That is because the daily changes during falling markets are significantly larger than when prices are moving higher.
This history fails to give guidance for the direction of price changes for this coming Monday: in the past, up days happened as often as declines in the following trading session.
DJIA .12
NASDAQ .86
S&P500 .38
