May 8, 2009
The last five days saw five direction changes, as prices rose on Monday, fell on Tuesday, increased on Wednesday, fell again on Thursday and closed the week with a gain. The S&P500 advanced 2.41 percent on Friday, while the DJIA increased 1.96 percent and the NASDAQ moved up 1.33 percent.
In the past, such strength with this pattern of fluctuations, on such fluctuations, occurred quite often. Indeed, the last two repeats, just months ago, resulted in a day of 6-7 percent gains, and 4-5 percent. Moreover, seven of the last eight series moved forward more than one percent on the final day.
Back in 20003, when the market finally hit bottom, the S&P500 increased 8.8 percent in ten trading days as it turned higher and started a new bull market. In 2009, in the last two weeks completed today, the S&P500 has added 8.36 percent to its value.
Furthermore, in 2003, prices increased seven times in those ten days. In 2009, however, with successive up and down changes, the overall advance is at just about the same rate.
Yet a significant difference exists: in 2003 the market had three distinct bottoms, which each one ending lower than its predecessor. So far, in 2009, though, only two such troughs have happened up until now.
Accordingly, if price actions are similar at turning points, the comparison of the past ten days foretells an imminent recovery. But if the number of bottoms, at the trough, is the issue, the ongoing price increases are not enough a lower, third, base needs to happen to signal an end to this long decline.
DJIA 1.96 percent
NASDAQ 1.33 percent
S&P500 2.41 percent