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The price momentum continues, as these indices close ever higher. Prices added more than one percent today, for the second day in a row.

It is not unusual for the S&P500 to increase more than one percent in a single day. Indeed, such gains occur often: they are more common when price are trending down. They accounted for 22 percent of all closes during the 2007/2009 bear market, but only for 9 percent in the 2003 to 2007 expansion.

Today’s diagram shows the time path of the S&P500 after closing above 1,500. This happened in 2000, 2007 and since January 25. Clearly, the ongoing expansion shows remarkable strength; it continues unabated, except for a short correction last month.

Without a record that allows comparison, the future of this bull market remains in doubt. These sharp, uninterrupted gains could result in cautious selling, or just as likely, in higher prices as buyers rush in seeking the profits they have missed.

DJIA              .96 percent

NASDAQ       1.14 percent

S&P500         1.05 percent

The DJIA, NASDAQ and the S&P500 gained near one percent, barely more than needed to restore the record setting closes of April 30. The resulting pattern of a positive day following a negative session has occurred 269 times over the last five price cycles.

On the following day –tomorrow- prices continued their gains 52 percent of the time. That proportion was somewhat larger for the 1996 and 2007 bull markets, but losses outnumbered gains 51:49 in the current expansion.

Today’s positive changes are a welcome departure from the losses that happened on the second trading day after a new record high. As discussed in yesterday’s analysis, prices declined sharply on the second day following the last two record highs. There were steep reversals in 2000: the NASDAQ fell -2.51 percent, the S&P500 lost -1.06 percent and the DJIA declined -.81 percent.

The reversals for the 2007 top were -1.40 percent for the NASDAQ, -.52 percent for the S&P500 and -.45 percent for the DJIA.

DJIA              .89 percent

NASDAQ       1.26 percent

S&P500           .94 percent

Prices declined almost one percent after hitting new highs two days in a row. History shows this loss is not unusual; indeed prices fell on the following days after the highs of 2000 and 2007.

The diagram shows the changes in the S&P500 for the first fifteen days after this index hit their previous record highs.

Those losses, though, were quite smaller.  The S&P500 change was  -.24 percent in 2000; it declined just -.17 percent in 2007. Today’s price is .93 percent lower than the day before – the day prices reached a new peak.

There is a distinct difference, however, between those earlier highs and today. Namely, prices declined thereafter; they never returned to regain or pass their previous highs.

The current market may well show more strength; rather than further declines –as in 2000 and 2007, 2013 may yet generate higher prices than the April 30 top.

Yesterday’s declines may be temporary, and the record shows losses after new highs as typical, not unusual.

DJIA              -.94 percent

NASDAQ         -.89 percent

S&P500          -.93 percent

The beat goes on, as the DJIA, the NASDAQ, and the S&P500 continued to new highs for the second straight day.

Our diagram presents the last three episodes when the S&P500 closed above 1,300. It shows that the current price expansion, that began in March 2009, is smoother and with fewer price reversals than the two earlier periods.

Note that each of the two previous runs above 1,300 ended and prices dropped. Further, these reversals lasted for hundreds of trading days.

Moreover, the two earlier run-ups experienced significant reactions before continuing their growth and setting new record highs.

So far, the present period of increasing values has not met such resistance – and has continued to make substantial gains over the last hundred trading days.

DJIA                .14 percent

NASDAQ          .66 percent

S&P500           .25 percent

The DJIA and the S&P500 hit historic highs while the NASDAQ closed at its best level in ten years! Thus the market returned to even higher levels, leaving behind the corrections of ten days ago.

Today’s pattern of two gains by the DJIA while the NASDAQ and S&P500 moved higher after Friday’s decline, last occurred in February 2006. That was some 1,511 trading days ago. Further, no repeats have crossed the tape in this expansion, nor in the previous 2007/2009 decline.

Our diagram locating these days also indicates gains and losses on the following days. While gains happened twice as often as losses, this history is not a reliable indicator of tomorrow’s changes. That is because this record refers to changes of long ago.

DJIA               .72 percent

NASDAQ          .85 percent

S&P500           .72 percent

Prices slipped slightly for the NASDAQ and the S&P500 while the DJIA edged higher. This combination occurred just 191 times in the 4,349 trading days of the last four price cycles. Though just 50 happened during the last two declines, their distribution over each up and down cycle is too diverse to allow identification with periods of up and down price changes.

Their incidence is identical at 5.9 percent of all trading days, for example, in both the 2003/2007 decline as in the current expansion. Further, the following day shows just about as many gains as losses over all the price cycles.

Continuing our comparison of recent bull markets, we focus on the 2003/2007 expansion. While it lasted for 1,154 trading days, it had a severe reversal and recovery before its end. The red vertical line in our diagram, at day 1,094, identifies this happening.

The black vertical line shows today’s close, 1,036 days into the current expansion. That means we have almost three months to go before reaching that decline in elapsed time  

Yet, with the steepness of the green line showing that recent gains have accelerated far more rapidly than during the earlier cycle, we might expect the reaction day to occur sooner.  

DJIA                 .08 percent

NASDAQ         -.33 percent

S&P500          -.18 percent   

The S&P500 and the NASDAQ have now extended their positive runs to five consecutive days. This follows the recent 10-day run where the S&P500 changed direction for ten consecutive days, and that in turn came after that index moved higher for ten successive sessions in the middle of March.

So today, we look at the previous two expansions to see how the daily time profiles compare to our current cycle.

The diagram plots all three price lines. The run that ended in March 2000 lasted 1,059 trading days while the later bull cycle topped out in 2007 after 1,154 days. This up-market has now completed 1,038 days.

Comparing these three time profiles, note that our current market is far less volatile than the previous cycles.

Further, both of the earlier expansions suffered significant price dips some 60 to 50 days before their peaks. Then prices soared dramatically, starting 25 days before hitting their ceilings.

With the ongoing expansion does not displaying these fluctuations, we can venture the possibility that its life span will continue. That is unless the current market behaves very differently from the historical norm.

DJIA                   .17 percent

NASDAQ           .62 percent

S&P500             .40 percent

 The S&P500 moved up, but gained just .01 point. The NASDAQ also closed higher, but added just .01 percent.  We have not found any other day ending with this combination. But extending the range, collecting all NASDAQ and S&P500 gains between 0 and .05 percent, the total count rises to 14. However, there are just seven, over the last four price cycles, since 1995.

All of these happened while prices were moving higher; none occurred during the last two bear markets.

This continues the many sessions that have features common to, or only during, bull markets. Therefore, we continue optimistic about the future, since we use such data to infer that price increases will be continuing.

However, the projection is not as bright for the day following this combination. The graph shows that prices on the next day moved up three times and fell the other four days.

DJIA                   -.29 percent

NASDAQ             .01 percent

S&P500             .00  percent

With the three averages adding more than one percent on their third successive positive close, we stand with yesterday’s analysis.

Three plus days occur more frequently when prices are trending up than when the path is down. Indeed, the data in our diagram reveals that bull markets’ three day positive streaks happen near three times the rate of bear markets.

This confirms yesterday’s projection that further price gains lie ahead.

Nevertheless, the statistics of daily gains greater than one percent by all three averages yields a cautionary signal: these have a significant correlation with bear markets. They accounted for 19 and 14 percent of all days during the 2000/2003 and 2007/2009 declines. The frequency was just .7 percent in the 2003/2007 expansion. While they account for 12 percent in present expansion, these large gains are features of bear markets.

Yet unlike the strong next day positive performance during bull markets of two upticks in a row, the record of the days following three straight gains is mixed. Indeed, the S&P500 fell more often than it rose during the 2003/2007 expansion.

This is the third up-three-straight-days this year. The previous close was on April 10; all three averages went on to enjoy a fourth up day. The earlier 2013 occurrence was in the beginning of March; while the DJIA and the S&P500 moved higher the next day, the NASDAQ declined.

DJIA                  1.05 percent

NASDAQ           1.11 percent

S&P500            1.04  percent

Today’s advance, after Friday’s increase, makes this the sixth time in 2013 that these three averages moved higher two days in a row. The last repeat happened on April 10, just eight days ago. The positive string continued on the following day, just as it did on the previous recurrence, March 5. However, prices fell more often than they rose on the following day for the three earlier repetitions.

This pattern happens as often as one day out twenty, on average.  Our diagram reveals an even more frequent occurrence, 1/12 days in the 2003 to 2009 period that covers a bear and a bull market.

Yet the frequency of positive next days shows a definite cyclical configuration. The two bear markets yield gains only 34 and 39 percent of the time, while the three bull eras show following day advances as high 60, 49, and 64 percent.

Thus two advances in a row occur far more often during bull markets than when prices are heading down. Accordingly, this history allows the projection and confirmation that prices will continue their move to higher levels.

DJIA                 .14 percent

NASDAQ          .86  percent

S&P500            .47  percent