USMarketView

September 25, 2012

With the three averages declining today, the market added another count to the unusual patterns of recent days. The count now adds up to four losses in a row for the S&P500, three straight declines for the DJIA and two negative closes for the NASDAQ. Just four such patterns exist in our data base that goes back to January 1950. Furthermore, the last such day occurred in June 1991! The other three go back even further, to February 1991, then to 1983 and 1982.

The record shows that losses continued only twice, in 1991, to result in a ‘S&P500 five straight declines, accompanied by four DJIA and three NASDAQ losses in a row’ combination.

Surely this long-ago, sparse record provides no basis for anticipating future prices. While we continue our search for relevance of these extraordinarily uncommon patterns, our efforts so far have fail to provide any clues.

Nevertheless, we counsel a heads-up caution while the financial markets continue moving in these recently unfamiliar patterns.

Here is a more recent data point: since January 2000, the S&P500 suffered four straight losses some 72 times, but it turned positive on 44 of the following days, adding only 28 fifth consecutive declines.

DJIA                                      -.64 percent

NASDAQ                              -1.31 percent

S&P500                                  -.91 percent

While the DJIA and the NASDAQ as well as the S&P500 lost ground today, it was the third decline in a row for the S&P500, the second straight loss for the DJIA while the NASDAQ fell after Friday’s advance. An uncommon pattern, to say the least, since it occurred only three times before in this century; moreover, there are just ten other such patterns between 1950 and 1999.

Further, price changes on the following day shows no consistency. Whereas the NASDAQ closed higher on all three of the next days, the S&P500 moved up only twice while the DJIA had only one advance.

Yet different daily changes is not uncommon for these three averages. Indeed, so far this year, there have been only 46 trading days where they closed with the same frequency pattern. In contrast the other 182 days showed diverse patterns for these averages.

Further, the number of different closing patterns in the past 13 years ranges from a low of 91 in 2003 to 186 in 2000.

DJIA                                       -.15 percent

NASDAQ                              -.60 percent

S&P500                                 -.22 percent

The NASDAQ added .13 percent while the DJIA lost -.13 percent and -.01 percent was shaved from the S&P500. These closes were the second loss in a row for the S&P500, a single loss for the DJIA and a single gain for the NASDAQ. This is just the fourth repeat in this century of this pattern; in total, only 14 other closes since 1950 have this pattern.

Our diagram locating these days reveals that three of these happened in the past two years, and the other occurred in 2001; that the following days are split evenly between advances and declines.

We repeat our alerts that recent closes show infrequent patterns, as well as consisting of small changes. Since the beginning of August, the median daily change of the DJIA is just .05 percent. This is far smaller than the .67 percent median positive DJIA change in this century. The S&P500 has similar features, while the NASDAQ recent median is just .13 percent, compared to the .98 percent median positive change since the beginning of 2000.

DJIA -.13 percent

NASDAQ   .13 percent

S&P500  -.01 percent

September 19, 2012                   A Mixed Day

While the DJIA closed higher for the third straight day, the NASDAQ and the S&P500 declined after yesterday’s gains. There have been only 13 other closes with this pattern in this century. The diagram locates these days. It reveals most of these -5- occurred during the 2000/2003 decline, with seven others posted since the 2009 bottom.

Moreover, on the following day, both the NASDAQ and the S&P500 moved higher on all seven next days in the market’s current rising prices trend. Further, during this period the DJIA increased only four times and fell on three days. Similarly, the DJIA closed higher on all five closes during the 2000/2003 bear market; both the NASDAQ and the S&P500 had a mix of gains and losses in the same time frame.

In the last 13 trading days, since the beginning of September, the DJIA has moved from 92.0 percent of its last, 2007 top, to 96.0 percent. That’s a 4.3 percent advance. The S&P500 picked up 3.5 percent, moving from 89.8 percent to 93.3 percent of its 2007 peak. Nevertheless, the NASDAQ remains ahead of these two averages, now at 113.3 percent of the 2007 high, adding 3.6 percent since the start of this month.

DJIA .14 percent

NASDAQ        -.21 percent

S&P500       -.05 percent

Prices edged up, with the DJIA gaining .11 percent, the NASDAQ rising .16 percent and the S&P500 adding .12 percent, as daily changes continued to be small. The DJIA closed with a smaller gain only 190 times in the near 3,200 trading days since January 2000. Similarly, the NASDAQ shows just 199 smaller advances while the S&P500 has 207.

Today’s pattern of two increases for the DJIA and single gains for the NASDAQ and the S&P500 is the 22^nd repeat in this century, but the 4^th replay since this past April. The record shows prices on the following day declining more often than increasing, with the DJIA and the S&P500 closing up six times and falling on 14 days. The NASDAQ has a somewhat larger gain ratio, with only twelve losses and eight increases.

Our diagram locates these closes for the S&P500. It shows almost no consistency, with most of these days happening during the 2000/2003 bear market and since March 2009, during the current bull phase.

DJIA  .11 percent

NASDAQ  .16 percent

S&P500              .12 percent

The NASDAQ remained almost unchanged, closing off -.03 percent, while the S&P500 lost -.13 percent. The DJIA moved in the opposite direction, adding just .09 percent. This pattern, the NASDAQ and the S&P500 down two days in a row with the DJIA up one day, has occurred only 19 other times in this century.

These days, however, added or subtracted, changes much larger than today; further most were seen during the 2000/2003 decline and the current up trend since 2009.

On the following day, gains just about equaled losses, except for the NASDAQ which had eight advances but eleven declines.

Today’s diagram compares the S&P500 daily closes of the current cycle with that of the previous up trend, between 2003 and 2007. While these do not have identical time paths, they nevertheless are quite similar. Indeed the current segment parallels the earlier trend, and raises the question of how much longer will this ongoing expansion endure.

DJIA .09 percent

NASDAQ       -.03 percent

S&P500       -.13 percent

As expected, prices fell after moving higher for four successive sessions. Actually, only 14 other days happened when they declined after four straight gains. As for the following day, in the past gains continued eight times, while prices fell on six days.

Remarkable strides to higher prices is the record of the last month. Since August 17, the NASDAQ has added 4.0 percent; it now stands at 113.4 percent of its last, October 2007 high.

However, the other two averages lag behind; they trail not only in their recent advances, but also in terms of their recovery since the March 2009 bottom. The S&P500 increased 2.8 percent since August, but the DJIA gained just 2.1 percent.

The diagram shows these data, revealing that the DJIA stands at 95.8 percent of its October 2007 high, while the S&P500 trails at just 93.4 percent of that top.

DJIA                                -.30 percent

NASDAQ                         -.17 percent

S&P500                          -.31 percent

September 14, 2012               Market Gains Continue for Fourth Day

Though prices moved higher again but far more modestly than the day before, the good news is that the chain of increases remains unbroken. And, just like yesterday’s analysis, these four gains in a row days cluster during the market’s bull phases.

The diagram shows that four up days closes happen 1.47% and .87% of the time during the 2003/2007 and the 2009/date rising price epochs. Similarly, in the two bear phases such days occur only .40% and .28% of the time.

Turning to the next day, in the past declines outnumbered gains for the DJIA and the S&P500 while the NASDAQ’s gains outnumbered losses by just 14:13.

Clearly, it would be very unusual if prices were to continue their positive run on Monday.

DJIA .40 percent

NASDAQ .89 percent

S&P500 .40 percent

September 13, 2012                            Third Gain Signals a Bright Future

The Federal Reserve’s new aggressive policy to prop up the economy and the stock market’s third positive day are two bits of good news. Prices rising three days in a row occurred only 73 other days in this century. Further, as our graph illustrates, these closes happen most often when prices are moving higher.

Almost 3 percent of the closes between the 2003 bottom and the 2007 top are in this category of three successive daily advances. Similarly, more than 4 percent of the current market days, since the 2009 bottom, are in the three gains in a row category.

However, the two bear markets have just one and one-half percent of their days with three gains in a row.

That’s the good news: with bull markets in the past featuring three successive gains, we can expect prices to move higher.

The bad news is tomorrow’s prices; in the past the day following three advances in a row, typically closed lower, or did so at least half of the time.

DJIA                                     .07 percent

NASDAQ                             .32 percent

S&P500                               .21 percent

September 12, 2012 Second Advance in a Row

While there have been 219 closes in this century where the DJIA, the NASDAQ and the S&P500 have moved higher two days in a row, today’s analysis will focus on that combination joined with the previous close of a single day loss of these three averages.

Today’s repeat is the 93^rd since January 2000. Our diagram locates these, and in addition, uses the green triangle to indicate an increase for the following day, while the red circle shows losses. These ups and downs are just about balanced between 2000 and 2009. However, since 2009, the NASDAQ and the S&P500 show advances on the next day occurring about twice as often as declines. The numbers are 14 up days and 4 down days for the NASDAQ. The S&P500 has 13 increases compared to 5 declines.

The DJIA, however, reveals an opposite situation, with just 8 gains but 10 declines.

DJIA .07 percent

NASDAQ .32 percent

S&P500 .21 percent