USMarketView

The S&P500 closed at 1472.02 just .07 points below yesterday’s 1472.12 – a change smaller than .01 percent.  A rare event that has just 13 previous repeats in this century. Yet the last four happened in 2012, occurring over just 74 days, between June 8 and September 24.

We find a similar chain during the 2000/2003 decline; that lasted 262 days.

Yet prices were trending higher when most of these inftesimal losses occurred.

Positive closes on the following days outnumbered declines 8:4, with three of the losses during expansions. Moreover, these next day changes have a wide range, extending from -.19 percent all the way to plus 2.29 percent.

These facts make interesting history, but yield insufficient insights to allow projections of future price movements.

DJIA                                   .13 percent

NASDAQ                           .12 percent

S&P500                            -.00004 percent

Today’s advance  is the second in a row, and following two successive declines, yields a combination seen just 35 previous times in this century. While these closes account for almost two percent of all days during the 2003/2007 expansion, they come to just .8 percent during the current cycle, and also to the identical .8 percent for the two contractions since 2000.

Prices tumbled on the following day more often than they increased, with the NASDAQ falling 23 times and increasing on just 12 days. The DJIA did a bit better, with a 20 loss and 15 gain record, while the S&P500 declined 19 times.

Yet these losses failed to stop the substantial gains at the beginning of the 2003 upturn, despite six of these negative repeats. Similarly, that expansion continued even through four further declines with the same pattern.

The same, seemingly contradictory pairing occurred during the 2007/2009 decline, when successive next day increases did not stem that contraction.

One final data point of interest for the following day: price increases exceeding plus one percent happened only three times, all during bull markets; only three declines deeper than minus one percent occurred, the last one, -3.44 percent, in 2010.

DJIA                                   .60 percent

NASDAQ                           .51 percent

S&P500                             .76 percent

Prices rebounded today following two negative closes, thus recapturing the gains of the year’s opening day. We focus on the pattern of  one advance following the losses of the first two days of the week. There have been 73 other such combinations in this century, and while prices increased again on the following 53 percent of the time, the daily changes vary widely in size.

Moreover, declines outnumbered gains 12 to 8 since the low point of March 2009. Further, daily losses ranged from -.07 percent to -2.02 percent in this period, while the advances ran from .41 to 3.80 percent. The previous 2003/2007 bull market experienced similar disparities, with gains running from .05 percent to 3.45 percent and lows between  -.23 and -1.91 percent.

Even wider disparities exist in the downturns: daily losses as small as -.07 percent stand next to drops of -1.50 percent in the 2000/2003 decline as well as -.61 percent to -6.12 percent during the 2007/2009 retreat.

Such wide disparities preclude meaningful projections based upon this pattern.

DJIA                                   .46 percent

NASDAQ                           .45 percent

S&P500                             .27 percent

January 8, 2013                                 Losses Continue

Though down two days in a row, following a gain that came after a loss, the markdowns remain modest: only 66 declines in this century were smaller than todays. That comes to less than 6 percent of the near 1,200 negative closes since the beginning of 2000.

The diagram focusing on today’s pattern –the second loss after a gain that came after a previous loss-identifies these as occurring with about the same frequency in each of the last four distinct market phases. In addition, prices on the following day moved higher about as often as they declined, with one exception. They increased eight times and declined on only three days during the 2003/2007 expansion.

The distribution of these closes suggests that they favor, or occur when, the market reverses direction. Though prices often change course following these breaks, the most recent events in 2010 with six such patterns in swift succession, saw prices continuing their move to higher levels.

DJIA                                   -.41 percent

NASDAQ                           -.23 percent

S&P500                             -.32 percent

January 7, 2013                          Down Again, Following Advance After a Decline

It’s the third price reversal in as many days – a combination seen 87 times before in this century. While more than half  coincided with rising prices, a significant portion happened close enough so market turning points to suggest a switch to caution.

Yet we see some optimism for future prices because of the moderate size of today’s declines. Our diagram shows the average price change during the two declines to be far larger than when the price trend is up. The S&P500 average loss of -.96 percent in the 2000/2003 market, as well as the average -1.77 percent decline in 2007/2009, exceed the mean losses of  -.65 percent and -.67 percent in the last two bull markets.

Thus today’s drop of a mere -.31 percent implies that, as in the past with this pattern, prices are not heading down.

Of course, it is far from encouraging to realize this pattern clusters at turning points; we remind you also that prices fell on the following day on the last repeat of this pattern, which happened just before the holidays.

DJIA                                   -.38 percent

NASDAQ                           -.09 percent

S&P500                             -.31 percent

For the 216th time in this century, prices moved higher after declining the day before. With nearly 3,300 trading days since January 2000, this comes to some 6.6 percent, once every 15 sessions, or one repeat every three weeks on average.
In addition to this regularity, prices on the following day moved up about as often as they declined. They maintained this next-day up/down consistency in good times and in bad times.
One feature though deserves attention: the irregularity of these repeats over the last four price cycles. Whereas this pattern occurred only 5.2 percent of the time in the current expansion, its repeat rate was 8.6 percent during the 2003/2007 bull market.

A similar disparity exists in the two bear markets: 9.3 percent from 2007 to 2009, but 4.6 percent in the 2000/2003 decline.
This pattern, accordingly, fails to provide much, if any, insight of future price developments.

DJIA                 .33 percent
NASDAQ         .04 percent
S&P500           .49 percent

For the 216^th time in this century, prices moved higher after declining the day before.  With nearly 3,300 trading days since January 2000, this comes to some 6.6 percent, once every 15 sessions, or one repeat every three weeks on average.

In addition to this regularity, prices on the following day moved up about as often as they declined. They maintained this next-day up/down consistency in good times and in bad times.

One feature though deserves attention: the irregularity of these repeats over the last four price cycles. Whereas this pattern occurred only 5.2 percent of the time in the current expansion, its repeat rate was 8.6 percent during the 2003/2007 bull market. A similar disparity exists in the two bear markets: 9.3 percent from 2007 to 2009, but 4.6 percent in the 2000/2003 decline.

This pattern, accordingly, fails to provide much, if any, insight of future price developments.

DJIA                                   .33 percent

NASDAQ                           .04 percent

S&P500                       .49 percent

Prices declined a bit after yesterday’s surge, ending a two day winning streak. It is the 27^th repeat of this pattern since January 2000. Yet gains continued on the following day 17 times, with further losses experienced on 11 days. Notably, today’s pattern is associated more frequently with rising markets: 23 occurred during the 2003/2007 and 2009/today bull markets. And on the following day, the NASDAQ increased 14 times, the DJIA 15 times and the S&P500 16 times.

Further, these results continue the recent drift of patterns and changes seen more often in rising than falling markets.

Other statistics also support an outlook of further appreciation. At today’s close, the S&P500 stands at 93 percent of its last highest close in October 2007 – whereas at the top of that expansion it had recovered 103 percent of its 2000 high. The DJIA did even better, ending at 127 percent of that 2000 top. Of course the NASDAQ had not regained its go-go high, and still hangs far below that fabled top.

Yet today the NASDAQ stands at 110 percent of its highest 2007 close. Comparable performances for the DJIA and the S&P500 require advances of 772 and 267 in these indices!

DJIA                        -.16 percent

NASDAQ                -.38 percent

S&P500                  -.21 percent

Prices scored their largest one day advance since August 2011, more than 345 trading days ago. This move on the heels of the increases of the last 2012 session on Monday will surely spread anticipations of further growth.

Yet gains of this magnitude occur more often with declining prices! Even those previous, large gains of August 2011 happened at the end of a significant correction. The market needed several months to regain the ground lost in the weeks before. It wasn’t until well into the following year that prices returned to, and passed, their pre-correction levels.

Be aware of the large range of price movements when asset values change to this extent. The NASDAQ daily change fluctuated from a low of  -3.9 percent to a high of 7.2 percent over the 19 closes in this range during the 2000/2003 downturn; and between minus five percent and plus six percent over the 24 occasions in the 2007/2009 decline. Even in this expansion, since 2009, NASDAQ closes extended from -4.1 percent to plus 2.0 percent.

Finally, a long range perspective: daily changes this large pair with bear markets. These accounted for 6.8 percent of all trading days in the 2007/2009 decline and 2.6 percent during the earlier 2000/2003 drop.

In contrast, only 1.6 percent of the sessions since the 2009 bottom scored these large advances while the share during the 2003/2007 bull market was even smaller: just .3 percent.

DJIA                        2.35 percent

NASDAQ                3.07 percent

S&P500                  2.54 percent

The market roared back, posting substantial gains after six straight losing days. While the turn-around was not unexpected, the greater than one percent gains are unusual: they belonging in the top five percent of all closes in this century.

The NASDAQ has an impressive record of gains on the first trading day of the year, with nine advances and just three losses since 2000. The outlook for the DJIA and the S&P500, however, is more modest; these indices moved up seven times and declined on five opening days.

Yet the diagram shows the S&P500 with a streak of four increases on the last four initial trading days of the year.

DJIA                       1.28 percent

NASDAQ                2.00 percent

S&P500                  1.69 percent