Once again prices failed to sustain the upward momentum; instead, they retreated after yesterdays strong showing. The decline, as so often before, was not deep indeed the NASDAQ lost -.52 percent, the S&P500 fell – .48 percent and the DJIA was off just -.36 percent- nevertheless, it broke what otherwise might have been the beginning of a smart chain of gains.
Consequently the indices posted their 1,038th repeat of up one day and down the next or -1/+1 in our pattern shorthand; it was the 414th since the beginning of 2000. As if history were confirming the see-saw of daily changes, the following day these three indices recovered 189 times, continuing on the downward path 143 times. (The price change for the remaining observations was not uniform not in the same direction- for the individual index.)Yet these swings far from being unique to the 2010 market also pervaded the last recovery between 2003 and 2007.
The diagram plots the daily price of that period on the same diagram as the current cycle. It shows, as we have observed before, the earlier but deeper turning point in 2009. Nevertheless, only 20 more trading days exist before the earlier decline finally ended.
An optimistic view of these time paths would be not to be concerned with the current backtracking, until the long anticipated resurgence is delayed beyond that point. Another, rival interpretation believes current prices in fact are parallel to the first cycle, and that their deviations result simply from the somewhat different path of their recoveries.
Obviously, having only two alternatives fails to consider the many other possible insights out there. Certainly, do not overlook the widely held belief that stock prices move independently of past experiences.
DJIA -.36 percent
NASDAQ -.52 percent
S&P500 -.48 percent