USMarketView

The NASDAQ slipped  -.20 percent whereas the DJIA and the S&P500 ended with small gains.  This closing combination -the DJIA and S&P500, up one day; the NASDAQ down one day- is rare, occurring on only 20 days in the past 17 years.

Another oddity of this pattern is how these days appear in close proximity.  Our diagram shows two happening within 22 days of each other during the 2004 bull market.  Another sequence of four such closes last year, within a 12 day period.

Note also that one of these closes came just 59 days before the 2000 market top.

Today’s diagram reveals the significant strength of this expansion, relative to the two earlier bull markets of this century. The S&P500 currently stands just about 20 percent above their highest prices; further, at 1,174 days of expansion, it is 20 days longer than the 2003/2007 expansion, and 115 days older than the bull market that ended in 2000.

DJIA               .82 percent

NASDAQ      -.20 percent

 S&P500        .43 percent

Activity since October 28 -six days ago- leaves the NASDAQ and the S&P500 just about unchanged; while the DJIA came out ahead, the gain amounts to less than a half of one percent.  Today’s diagram showing these six-day runs for the S&P500 reveals this the seventh such repeat this year. 

It shows that substantial price regressions follow these declining levels of six-day changes.  Yet, so far this year, such declines were not only brief, but moreover prices returned to their previous rates of gain.  Nevertheless, given that the current expansion, now at 1,173 days since the last bottom, is already the longest of the last three bull market, the current drop deserves consideration.

Turning to today’s closing pattern –three successive up days for the NASDAQ, combined with single day losses for the DJIA and the S&P500- we note only 47 such combinations occurred over the more than 3,000 trading days since 1996. Looking at tomorrow, note that prices on the following day moved up as often as they declined.

DJIA               -.13 percent

NASDAQ          .08 percent

 S&P500         -.28 percent

For the second day in a row, prices moved higher but gains were small:  today’s S&P500 changed by only .36 percent, while Friday’s advance was a similar minor .29 percent.  By contrast, the median gain over the more than 1,100 closes of the current bull market amounts to .57 percent.

All the same, though, small advances are more typical when prices are moving higher; the median positive change of the S&P500 in bear markets is nearly double that of bull market gains.

Today’s diagram shows that closes this small occur  on only one of every five days – but this proportion rises to about twice that when prices are trending up.

This history allows the conclusion that the current market remains in a moving higher mode.

DJIA               .15 percent

NASDAQ         .37 percent

 S&P500        .36 percent

Despite the government shutdown, the nascent debate on the role of the Federal Reserve and even the introductory troubles of Obamacare, the stock market keeps moving higher.  The S&P500 added 4.12 percent last month, following September’s 3.35 percent. Thus, focusing on July’s 5.7 percent, and putting aside August’s mere .96 percent, prices continue their record advance. 

This strength may be surprising in face of the modest changes of the past few days, but our diagram reveals that such smaller changes dominate the last days of the past two months, as well as at the end of July.

Today’s diagram presents meaningful insights into the market’s profile; it presents the chronology of each day’s trading in 2013.  Among its many revelations, is the stability dominating July’s trading.  That month’s near six percent advance results from a steady flow of modest gains as well as suffering only six losing days. 

It becomes apparent also that August’s modest result comes from 13 negative days -the most of any month this year- many of which experienced significant declines.

DJIA               .45 percent

NASDAQ         .06 percent

 S&P500         .29 percent

Prices slipped for two successive sessions for the third time this month.  It would not be surprising if the current turmoil in Washington, combined with President Obama’s falling ratings, bear some responsibility for the market’s lack of optimism.

History shows that two down days in a row occur more frequently when the trend of prices is down; they account for 5.5 percent and 6.8 percent of all days in the last two bear markets.  In contrast, while the rates for bull markets are 3.9, 5.5, and 5.3 percent, these differences are quite modest.

Yet a significant disparity exists in how far prices decline on the second successive loss day.  Today’s diagram shows these days with a separate scatter for each of the last five price cycles.  The median S&P500 daily losses in bear markets of -1.37 and -1.44 percent are almost twice as deep as the median losses during bull markets.

Further, with today’s losses far smaller than any of these medians –even those of bull markets- it appears that prices will remain robust; they may even accelerate once our government gets our current problems behind.

DJIA               -.47 percent

NASDAQ       -.28 percent

 S&P500         -.38 percent

Prices declined about a half a percent as the Federal Reserve two day meeting ended, with expectations that it would maintain its open market purchases and continued its policy of ease.  Yet given the deepening disquiet in Congress about the Fed and its upcoming chairperson, it is not unreasonable to consider the possible impact on asset prices.

Clearly some of the Congressional enemies of the expansionary policy of the Fed are increasingly vocal, and are now finding support for their demand of an audit.  They are pressuring for more openness by the Fed – even though making the Fed tip its hands on intended purchases and sales will not only create windfalls for traders but also lead to diminishing their impacts on the economy.

Our diagram shows just how these short-term interest rates affect asset prices: clearly the price changes in the S&P500 run parallel to the interest rate of the Ten Year Treasury debt.

DJIA               -.39 percent

NASDAQ         -.55 percent

S&P500         -.49 percent

Up for the fourth straight day, the S&P500, though gaining a mere .56 percent, posted another new high.  The other two averages, however, posted their first gain after falling the day before.  This extremely rare pattern happened this past July –and only three other times since 1996.

Therefore, we focus today on four advances of the S&P500 while the DJIA and the NASDAQ closed with different counts.

With our diagram revealing 38 such days, with all but five coming during bull markets, this pattern clearly signals prices moving higher.

In the past, the following day posted gains more often than losses.

DJIA               .72 percent

NASDAQ        .31 percent

S&P500         .56 percent

Up for the third successive day, the S&P500 reached 1762.11 moving along a trajectory of successively higher tops.  Further, today’s pattern of three advances for the S&P500 while the DJIA and the NASDAQ turned down, parallels the previous close, in mid-July, when the S&P500 set an earlier new high.

Today’s diagram showing this pattern’s previous closes over the past five market spans, reveals some clustering at market highs and lows.  One happened on the last day of 1999, some 58 days before that 1996/2000 expansion turned down.  Similarly, another one occurred some 200 days before the 2007 top.  Finally, one of these days took place in February 2009, just 18 days before the start of this current bull market.

We focus on these turning point relationships as a caution; the S&P500 continues to escalate, setting new highs while the current expansion, now in its 1,167^th day, is the longest bull market on record.

DJIA               .39 percent

NASDAQ         .37 percent

S&P500        .44 percent

Prices advanced for the second straight session as the current upward movement completed its 12^th trading day since its last low on October 9.  Today’s diagram shows the three completed steps of this year’s bull market.  It reveals these intervals becoming shorter, declining from near thirty days at the beginning of the year to the last complete wave on October 9, some 15 trading days.

Should this trend continue, then the current price advance will continue for three more days.

So far this year, gains on the positive side run considerably above the losses on the following decline.  Prices increased by 7.4 percent and fell some 4.9 percent in the first wave.  Gains on the following segment came to 8.6 percent whereas they fell only 4.6 percent in that decline.  The 5.8 percent increase of the last complete cycle also exceeded the following loss of 4.0 percent.

At this point, some 12 days into the current upswing, the S&P500 has added 6.3 percent.

DJIA            .39 percent

NASDAQ      .37 percent

S&P500       .44 percent

Gains came to just about equal the losses of the day before, thus the major averages remained almost unchanged.  Similarly, in the past, prices on the following day -that is tomorrow- had an almost equal number of gains and losses.

With little to be said about this pattern, we continue with our analysis of differences and similarities of this and past bull markets.

Today’s diagram shows the daily changes of the S&P500, from the 950^th day of expansion to the last day of expansion.  It reveals two significant differences between the current bull market and the previous two expansions.

1.     Clearly  daily fluctuations are far smaller in this expansion than in both the earlier ones,

2.    The standard deviation, which summarizes the daily volatility, in the current market is less than half that of the 2000,  is less than half of this expansion,  

3.    The strength of this bull market -as measured by the median of  daily S&P500 changes-  is nearly double that of the two earlier ones,

4.    The profiles of the 2000 and 2007 market reveal increasing daily variability as they reach their tops.  

DJIA               .62 percent

NASDAQ        .56 percent

S&P500         .33 percent