Prices for the DJIA and the S&P500 today changed direction for the fourth time over the past four trading days. Yet, the NASDAQ, which also declined today, scored three advances in a row during this period. Moreover, each of these indices dropped more than one percent at the end of the day.
That this roller coaster experience leads to questioning the markets future, especially in light of the disturbing developments in Europe, should not be surprising. Whereas gains or losses- day in and day out also stimulate probing, their direction simply reinforces views of the outlook.
Accordingly, we look at the past to frame our views.There have been 149 repeats of this four day down and up pattern, with 59 occurring over the past decade. The diagram pinpoints these with triangles and the vertical lines separate falling and rising trends.
Their distribution appears unrelated to the markets underlying direction. Casual inspection does indicate their tendency to bunch at turning points. Yet this is so whether prices change for the worse or the better. Moreover, the declines in the S&P500 for this pattern are in the same range as today, and their averages are unrelated to market tendency.
Even though this first approximation fails to provide a forecast of prices, it reassures because flutters occur but these are not always associated with market declines.
DJIA -1.05 percent NASDAQ -1.26 percent S&P500 -1.22 percent