April 7, 2009
Todays decline, sharper than the typical change in the second session after four straight gains, also defied its historical frequency. In the past both the NASDAQ and the SP500 moved higher three times more often than they fell; indeed, the DJIA ratio stands at 7:1. Moreover, the NASDAQs two U turns in this century ranged from -.92 percent to -2.91 percent. Yet it was off -2.81 percent at the close. The comparison is worse for the other two indices. The DJIAs drop of -2.34 percent is huge to its only decline of -.07 percent since January 2000. Similarly, the SP500 had two earlier losses less than – .74 percent, far smaller than todays -2.99 percent.
Looking at history again, to anticipate what the market may do tomorrow, however, yields a perspective similar to todays. As before, increases outnumber the decreases, with ten gains against six losses for the NASDAQ and the SP500. However, there is only one occasion when all three indices fell for a third day in a row after four straight increases; and those losses ranged from -2 to -3 percent. Yet even that past event an optimistic side because it occurred only days before the 2000/2003 bear market hit its bottom.
DJIA -2.34 percent
NASDAQ -2.81 percent
S&P500 -2.99 percent