The NASDAQ soared 1.26 percent, scoring its largest advance since August 2s 1.80 percent. The other two indices posted similar increases, with the S&P500 up 1.22 percent and the DJIA rising 1.01 percent. Today is the second successive plus close for the NASDAQ and the S&P500; it is the first positive day for the DJIA after five successive declines.The resulting pattern of +2 for the NASDAQ and the S&P500, with +1 for the DJIA, happened 41 times, with 13 closes since January 2000. On the following day, the recent group had almost an equal number of positive and negative changes.
Whereas todays significant advances ratified the projection based on yesterdays historic results that increases were three times as frequent as decreases.
Addressing the ability of todays pattern to yield significant and correct projections of the future, the diagram illustrates a test in which the forecast period was set arbitrarily to 50 days ahead.
The circles represent the S&P500 values of the last 13 closes with todays frequency pattern. The triangles directly below those circles indicate the actual, future prices 50 trading days thereafter.
Eight of these 50 day projections showed falling prices with increase occurring just five times. Allocating these results to periods of falling and rising prices, shows that during the 2000/2003 bear market, future prices fell three times and increased just once. In the following 2003/2007 expansion, the two increases offset two declines. Finally, the last bear market of 2007/2009 registered three increases and two declines.
Accordingly this tabulation shows that forecasts based on this haphazard 50-days-ahead scheme fail to provide useful insights. Thats because only the first, declining phase yields a plurality of losses; the following rise as well as the next decline, however, does not. Whereas the 2003/2007 stage had an equal frequency of gains and losses, the next, negative phase had the contrary outcome of just two declines but three advances.
Yet, lest we overlook the random, arbitrary method of projection other estimates based on the fundamentals of market delays deserve attention. DJIA 1.01 percent NASDAQ 1.26 peercent S&P500 1.22 percent