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Finally, after five consecutive gains, the NASDAQ and the S&P500 declined.  Yet the overall price trend reveals substantial momentum.  So far, 71 percent of the S&P500 closes showed gains, whereas in earlier months this ratio was in the 50 to 60 percent range.

Prices close with new highs on a near every day basis, as this expansion, now in its 1,164^th day, continues, though this bull market already is the longest on record.  Thus it becomes reasonable to compare features of this market to what happened as the most recent two tops since 1996 reached their upper turning points.

Today we focus on the number of consecutive up days, considering only runs longer than four consecutive days.  The diagram reveals two recent sets of eight successive gains.  These runs occurred also in the two earlier expansions.  However, with these happening about half way in their run before reaching their tops, we can infer that the current bull market will continue for some time, before prices start their decline.

DJIA              -.35 percent

NASDAQ        -.57 percent

S&P500         -.47 percent

With all three market indicators closing higher, the resultant pattern of five straight advances for the NASDAQ and the S&P500, combined with a first positive day for the DJIA, yields a combination seen just four other times.  The last two took place this year, one just days ago in September with the earlier one on April 26.

Since the other two happened during the 2003/2007 expansion, it seems this pattern and bull markets go hand-in-hand.  However, since one took place some 89 trading days before that top, a caution is necessary.

Given that the S&P500 increased 5.9 percent over the last nine trading days, today’s focus is on the extraordinary strength of the current market.  Our diagram plots these nine-day percent changes of the S&P500.  It reveals that ‘high gain’ segments cluster around declines, but   it shows also none as high as 5.9 percent occurring recently.

Thus the welcoming of strong spurts is not without some apprehension, given their preponderance while the market suffers substantial declines.

DJIA              .49 percent

NASDAQ       .24 percent

S&P500       .57 percent

Today’s  unusual close –the DJIA losing ground whereas the NASDAQ and the S&P500 completed their fourth consecutive advance-  follows Friday’s similarly odd configuration of the DJIA not moving in tandem with these two other market barometers.

Though this pattern occurred only ten previous times since 1996, today’s repeat is the third such close this year.  The two other closes happened this April and just last month, in September.  A further oddness is that all three of these 2013 happenings resulted in only minute changes.  The S&P500, for example, gained just .01 percent today, and even less than .01 percent in the two previous closes.

Further, as in the other and earlier rare patterns, one of these days cropped up just at the 2000 bull market top, while another chanced some 90 days prior to the next, 2007 price maximum.  

Our diagram locates these ten days and shows that prices declined on six of the following ten days. 

DJIA             -.05 percent

NASDAQ        .15 percent

S&P500         .01 percent

Just 12 other days exist closed with today’s combination of three consecutive advances for the NASDAQ and the S&P500 and only two up days for the DJIA.  Today’s diagram shows almost all happening during bull markets, with merely two in declining markets.

Yet the record contains a possible caution: one of these closes coincided with the market top of March 2000.  Moreover, combining this caveat with the record length of this expansion, now in its 1,161^st day, adds credence to this warning.

As for tomorrow, prices moved higher on the day following this sequence just twice as often as they declined, with that ratio rising to three gains and one loss during the 2007/2009 bull market.

DJIA               .18 percent

NASDAQ      1.32 percent

S&P500         .65 percent

No great surge of optimism, nor pessimism, ricochet through the financial world as the Treasury avoided its threatened abyss at the 12^th hour.  The NASDAQ and the S&P500 closed with moderate gains whereas the DJIA was in the red by just .02 percent.

This action, following yesterday’s DJIA advance while the NASDAQ and the S&P500 declined, yields a pattern seen more often during bull markets than when prices are heading down.  However, such closes are far from common.

We note, though, that one of these happened just one day before the bull market ended in March 2000; also that another occurred 16 days before prices hit bottom in March 2009.

As for tomorrow, the diagram shows that higher prices outnumbered declines 2:1 in the first bull market, 2.5:1 in the second expansion, and 3:1 in the current, since 2009, growth cycle.

Yesterday Standard and Poor estimated that the 16 day government shutdown would reduce 2013’s GNP growth by a full percentage point, from three to two percent.  We belief this projection is a substantial overstatement.

Consider the following facts.  The loss of GNP from the original growth projection of three percent is a full one percent.  That one percent decline, when divided by the three percent, means a forfeiture of 33 percent. 

Yet the shutdown lasted only eleven business days, of the 260 business in the calendar year.  That means the federal government inactivity amounts to 4.2 percent of this year’s business days.

This multiplier seems excessive – that an idle factor 4.2 percent would result in a 33 percent GNP loss.  Further, the rest of the economy, which outweighs by far the Federal contribution, was not shutdown, even if its pace was hindered by the government furlough.

DJIA              -.02 percent

NASDAQ         .62 percent

S&P500          .66 percent

That’s the headline as we post our blog at 5:20 PM.  After the many days of the yes/no strife in the Congress, the market seems to belief that the U. S. Treasury will avoid default.  This is the inference of today’s 1.38 percent advance of the S&P500.

As our diagram reveals, it is rare to see daily gains this large.  Only four such days occurred before September 30.

Yet the S&P500 added some 2.18 percent just days ago, on October 10, while the federal shutdown remained unresolved.

It seems safe to conclude that the stock market remained firm, that stockowners stayed calm, throughout these uncertain days, since the recent profile of the S&P500 remained unchanged from the first nine months of this year.

DJIA              1.36 percent

NASDAQ        1.20 percent

S&P500        1.38 percent

Today’s declines were not unexpected: history reveals only an even chance of further gains on the day following four straight advances.  Hence, we ought not to blame the Congressional stalemate. 

Yet the uncertainty of what might happen deserves attention.  Today’s diagram considers the last time the government operated without a budget in 1995; it resulted in two shutdowns. They happened in November and again in December, with the latter lasting into early January 1996.

We have plotted the daily S&P500 close as a proportion of the first January close in 1995 and 2013.  This comparison then is net of the absolute price differecnes in these two years.

Quite surprisingly, however, the price paths of these two far-apart years are almost parallel. Nevertheless, this year’s declines around the September 30 end of the government’s fiscal year, are sharper than in  1995.  The fact that now the government iss shutdown, whereas in the earlier episode, the feds were not cut-off till mid-November is one way to explain this difference.

Overall,  though, it seems reasonable to infer that the 1995 budget difficulties were short lived, that stock prices withstood the negative impacts, and suffered only temporary losses.

Yet, with the interest rate on the Ten Year Treasury  rising again, closing at 2.72 percent, it is clear that the outlook of the basic financial market is far from optimistic. 

DJIA              -.87 percent

NASDAQ        -.56 percent

S&P500        -.71 percent

Four straight advances by the DJIA and the S&P500 propelled the market to new highs.  These closes, combined with three consecutive NASDAQ gains, yield a combination seen just six other times since 1996.  More important than the count, however, is the fact that all happened during bull markets.

Further, as today’s diagram shows, with almost all occurring during the early and middle stage of these last three bull markets, this pattern of closes suggests still higher prices ahead.

So far this market seems not affected at all by the continuing government shut down.  The one slight exception comes from the rising interest rates on the U.S. Treasury’s ten year debt, which have increased a total of 2.2 percent over the last five business days.

DJIA              .42 percent

NASDAQ        .62 percent

S&P500        .41 percent

October 10, 2013    Large Gains as Bull Market Breaks Length Record

Prices increased more than two percent today, setting a new  duration mark, on this the 1,155^th trading day since its 2009 low.  The longest previous bull market ended in October 2007, after 1,154 days.

Today’s closing pattern also deserves attention: the combination of two straight advances by the DJIA and the S&P500, combined with one positive day for the NASDAQ occurs more often when the trend of prices is up.  Our diagram locates these days.  While the proportions vary significantly, note that the 1996/2000 bull market’s frequency runs more than trhree times the rate in the following bear market.

Note that the record points to a favorable outcome for tomorrow: gains exceed declines about 2:1 in past bull markets.

Yet today’s large price increases cast a shadow on this favorable outlook. Large daily gains occur more often when prices are trending down, than during expansions.  They amounted to four and eight percent of the last two bear markets, but this ratio came to just 1.2 percent, .4 percent and 2.2 percent during bull markets.

DJIA              2.18 percent

NASDAQ       2.26 percent

S&P500        2.18 percent

Prices remained almost the same as the day before, though the NASDAQ fell a bit as the DJIA and the S&P500 edged higher.  The resulting pattern of three straight losses for the NASDAQ with a one day increase for the other two market averages, yields a rare pattern. It occurred just 19 previous times since 1996 – with almost an equal number of hits during bull markets as well as bear markets.

Today’s diagram reveals no consistent differences between these two market phases, and shows more declines on the  following day than increases.

DJIA              .18 percent

NASDAQ      -.46 percent

S&P500         .06 percent