November 14, 2008
Despite steep declines, the market did not lose all of yesterdays appreciation. Nevertheless, with four down days, prices ended the week below last Fridays closes. The NASDAQ gave up -7.92 percent for the week, the S&P500 -6.20 percent, while the DJIA dropped -4.99 percent.
Returning to yesterdays analysis, showing that the 1987 recovery awaited sharp price reversals before moving to an upturn that grew values for several years, the question is whether the current market has reached that required stage.
This years S&P500 price profile, in the diagram below, reveals that its recent declines do form a triple bottom. But is this formation sufficient and similar enough to the 1987 pattern- to signal an impending strong recovery? (Note that the 1987 price profile is part of the November 13 posting.)
Moreover, this same comparison should be extended to the 2002-2003 turnaround. It is clear, by reviewing both these cases, that the previous recoveries endured far deeper price erosion than suffered so far in 2008.
DJIA -3.82 percent
NASDAQ -5.00 percent
S&P500 -4.17 percent