USMarketView

August 24, 2012                                          Fourth Direction Change in Four Days

The see-saws of daily gains followed by daily losses continues, as the DJIA, the NASDAQ and the S&P500 reversed direction, moving higher after yesterday’s declines. Today’s such close is the 501st since the beginning of this century some 3,181 trading days ago.

Prices on the following day, in the past, continued higher for all three of these averages just 219 times – all three averages reported declines on only 165 days. In summary, that results in about a third more price gains than losses.

These iterations of successive daily changes show no relationship to the trend of prices, occurring near as often during bull markets as bear patterns. While 12 percent of all closes during the 2000/2003 decline were ups-then-downs, they rose to nearly 18 percent in the 2007/2009 bear market. Similarly, 15 percent of the 2003/2007 expansion days belonged to this class, but only 11 percent have done so since the 2009 bottom.

DJIA                                                   .73 percent

NASDAQ                                           .58 percent

S&P500                                             .67 percent

August 23, 2012                     Third Direction Change in Three Days

Both the NASDAQ and the S&P500 posted their third direction change in the last three days while the DJIA fell for the fourth successive session.

The record shows just six such closes in this century, and a total of 13 going back to 1950. The diagram identifies these last six and reveals these occurring mostly when the price trend is up. Based on this history, we project the market continues to point up despite the current pause and sidewise price changes.

Yet in the past, prices fell on the following day, and further, these declines were substantial.

2012 Gains Far Above Average

In the 160 trading days since the beginning of the year, the DJIA increased 9.7 percent; the average gain for any 160 days since the beginning of 2000 is 1.7 percent. Similarly, the NASDAQ rate is 17.9 percent compared to 2.82 percent, while the S&P500 current increase is 11.1%, substantially greater than the 1.2% of the last 13 years.

DJIA                                            -.88 percent

NASDAQ                                     -.66 percent

S&P500                                        -.81 percent

August 22, 2012                      More Rarities

The NASDAQ moved up  .21 percent today, while the DJIA fell -.23 percent and the S&P500 notched up .02 percent. It was the third decline in a row for the DJIA, whereas the NASDAQ and the S&P500 turned positive after two previous losing days.

Today’s is the 13th repeat of this pattern in the past 13 years. Our diagram of the NASDAQ locates these previous closes, and, at the top shows the percentage changes on the following days.

Note the NASDAQ’s severe fall; it reflects the end of the go-go days. Yet otherwise this diagram reflects  this patterns’ negativity. On the other  hand, it shows the recent switch, from losses to gains. The last four repeats are all positive, with three following day increases exceeding one percent.

If this diagram seems strange it’s because the NASDAQ’s horrific decline – from which it still has not recovered. Yet it reveals the strong recovery, since the 2009 low, of this index, now at 109 percent of the last high in October 2007.

These date allow no  projection  for tomorrow, since the following day history is split evenly between six gains and six losses.

DJIA                                -.23 percent

NASDAQ                          .21 percent

S&P500                            .02 percent

August 21, 2012                     Small Declines

Prices fell for the second day in a row as the market backed off after values continued their recovery. The NASDAQ closed at 109.4 percent of its 2007 high, 870 market days after the March 2009 bottom. Finally the DJIA and the S&P500 have resumed their recovery, and today reached 93.2 percent and 90.3 percent of their high in 2007.

Today’s pattern of two losses in a row is quite common, having occurred 166 times in the 3,120 sessions in this century. In the past the following day was distributed almost equally between a further loss -78 days- and an increase -86 times.

Yesterday’s changes were too small to permit a projection for today.

DJIA                                        -.51 percent

NASDAQ                                -.29 percent

S&P500                                  -.35 percent

August 20, 2012                          Another Rare Pattern

All negative changes of the DJIA, NASDAQ and the S&P500 are so small as to be insignificant. The S&P500 decline, for example, is less than .01 percent! The DJIA posted the largest decline today at -.03 percent!

The last time changes this small occurred was in 1991. Yet in the 1960′s four such closes posted. Our diagram reveals these to be associated with falling prices.

We share these results more as history than as possible projections of what might happen in the near future.

Unusual is the best word to describe recent patterns and changes in the market – yet our analysis so far has not revealed the why and the how these rare patterns, not seen for decades, will affect the future.

DJIA                                            -.03 percent

NASDAQ                                    -.01 percent

S&P500                                      -.00 percent

August 17, 2012                                Prices Continue Higher

With the three indices scoring another gain, the pattern at the close was three consecutive increases for the NASDAQ and the S&P500, while the DJIA was up for the second day in a row. This combination is the 14th repeat since the beginning of 2000.

The diagram isolating these closes shows that eight of these days occurred in this expansion, since the bottom of March 2009. Further, the previous, 2003/2007 bull market saw three days with this pattern.

With just another three happening during the two declines in this century, it is plausible to conclude that this pattern, and the current market position, signifies higher prices in the future.

Yet, based on similar reasoning and counting, be prepared for price declines on Monday since nine of the last 14 repeats had losses on the following day.

Note that today’s gains verified yesterday’s projection of price increases today, making it the second day in a row that price predictions based on past repeats of frequency patterns proved to be correct.

DJIA                                   .19 percent

NASDAQ                           .46 percent

S&P500                             .19 percent

August 16, 2012                  Best Day Since Friday

Prices moved higher, scoring the best advance since last Friday. Both the NASDAQ and the S&P500 posted their second straight gain, while the DJIA moved into the positives after yesterday’s decline. It is the 29th repeat of this pattern in this century, and the 57th 1950.

Yet this combination occurred 16 times since March 2009, but on just 13 other days in the 12 years since January 2000. Accordingly, we add today’s pattern to the list of ‘unusual combinations’ that gave dominated recent price and frequency activity.

Looking at tomorrow, note that gains outnumbered losses 16:12 in the past, and that most of these gains came during this current upturn since the 2009 bottom.

Note that today’s gains verified yesterday’s projection of price increases today.

DJIA                           .65 percent

NASDAQ                  1.04 percent

S&P500                      .71 percent

August 15, 2012                            Just 22 Previous Closes

The DJIA lost just -.06 percent while the NASDAQ and the S&P500 moved a bit higher. This combination is another incident of the growing number of days closing with patterns rarely seen before. Today’s has just 26 precedents, with 22 coming in this century.

Further, this pattern has a unique distribution: none occurred in the seven years between 2002 and 2009. Indeed 17 of these 22 happened since the beginning of this recovery on March 2009.

So far our analysis has not succeeded in linking this, and other similarly rare patterns with future price changes. Since this linkage is the primary motivation of our efforts, we are disappointed but not discouraged.

As for prices tomorrow, in the past 13 of the following days posted gains.

DJIA                                  -.06 percent

NASDAQ                           .46 percent

S&P500                              .11 percent

August 14, 2012                      Another Rare Pattern

The market continues posting unusual patterns: today’s DJIA gain, the NASDAQ loss and the second decline of the S&P500 occurred only five other days in this century. Prices on the following day moved higher as often as they declined.

Here’s a bit of history: of the more than 3,000 sessions since the beginning of 2000, these three averages moved up or moved down less than half the time. There were 832 days when all three moved higher and 728 closes when all three declined.

Further, two-thirds of the all-three-positive days came during bull markets while 62 percent of the all-three-negative days occurred while the trend of prices was down.

DJIA                              .02 percent

NASDAQ                     -.18 percent

S&P500                       -.01 percent

August 13, 2012       Diverse Changes: What Do They Mean?

The focus of our analysis is on three indices: the DJIA, NASDAQ and the S&P500. Most of the time, they change in the same direction, and with the same frequency. Today, however, each of these marched to a different tune. The S&P500 declined, the DJIA closed lower for the second day in a row, whilethe NASDAQ moved higher for the third straight day.

This pattern happened just three other times since 1950: in 1974, 1975 and 1985.

Further, yesterday’s pattern and the day’s before were even more infrequent, occurring just twice, in 1972 and 1995.

While we have not discovered a relationship between these infrequencies and future prices, an alert is warranted.

DJIA                               -.29 percent

NASDAQ                         .05 percent

S&P500                          -.13 percent