New highs continue for the DJIA and the S&P500 – though their recent step-ups -ups are minute. These two averages moved slightly higher for the second day in a row, while the NASDAQ posted a moderate decline. This closing pattern happened just 42 times in the 4,625 trading days of the last five major market trends. That total comes to less than one percent of all trading days.

Yet these closes happen about twice as frequently when prices are trending down. This preponderance is very evident in today’s diagram: the frequency in the current expansion of just .53 percent is about a third of the 1.69 percent level of the previous, 2007/2009 bear market.

However it is inappropriate to consider today’s pattern as signaling a top and subsequent declines for the current market. That is because the daily changes during falling markets are significantly larger than when prices are moving higher.

This history fails to give guidance for the direction of price changes for this coming Monday: in the past, up days happened as often as declines in the following trading session.

DJIA .12
NASDAQ .86
S&P500 .38

Prices declined today – as expected after four straight advances. The good news, though, is their negligible size. The S&P500 was shaved just -.11 percent – a far smaller dip into red ink than the loss after four straight gains experienced in previous bull markets. The median declines for each of the last three bull markets are -.72 percent, -.55 percent and -.74 percent. Comparable declines -after four advances- for the bear markets are -1.19 and -1.79 percent.

The diagram pictures these facts. It shows quite clearly what appear to be the structural differences between expanding and declining markets.

Today’s results, accordingly, lead to the belief that the price advance will continue – even though the age of this bull market -1,312 trading days- make it ripe for a significant decline.

DJIA – .25 percent
NASDAQ – .28 percent
S&P500 – .11 percent

The S&P500, scoring a second new high in as many days, reveals the strength of the ongoing expansion. Now 1,311 trading days since the March 2009 bottom, prices show no sign of weakening. Indeed, today’s close -the fourth straight advance-has happened just 40 times since 1996. Note that all but three occurred in bull markets -and today’s is the fourth such close this year.

It should not be surprising if tomorrow’s market will close down -especially since there have been just five consecutive up days.

It is reasonable to believe that lower interest rates contribute to the market’s strength. The S&P50i0 has gained 5.3 percent since April 1; during this same peeriod the Ten Year Treasury interest rate has declined from 2.76 percent to 2.52 percent. That markdown amounts to some 8.8 percent from the April rate.

Today’s diagram reveals this close correlation. That means despite the emphasis by the Fed, and market observes, that credit tightening looms in the future, the opposite in fact is occuring.

DJIA + .42 percent
NASDAQ +1.22 percent
S&P500 + .60 percent

The S&P500 established a new high, closing at 1900.53. It took 124 trading days to move the 100 points from the previous century crossing that occurred last November. That is a slower growth rate than the two previous crossings. When the S&P500 closed above 1800, it took only 61 days to move the 100 points from 1700; while the move from 1600 tokk 69 days.

Further, today’s pattern of three consecutive advances after Tuesday’s decline,is a typical feature of bull markets. The diagram reveals this combination happening about once in every fifty trading days during the past three expansions. That is twice the rate of once per hundred days when prices are falling.
Meanwhile history reveals a bright outlook for the next day -on Tuesday after Memorial Day.

Most of these past following day closes for this pattern were a fourth positive close in a row.

DJIA .38 percent
NASDAQ .76 percent
S&P500 .42 percent

Prices increased again, yielding a pattern of [+2, -1, +2] -that is, two gains aftr one decline, following two advances. This combination is associated more with bull markets than when prices are trending down. The diagram locating these days reveals a major cluster during the 2003/2007 expansion. It shows also a complete absence of this pattern in the 2000/2003 bear market. Yet today’s pattern is not solely a feature of bull markets: the greatest frequency happened while prices were heading down after the 2007 market top.

The outlook for tomorrow is mixed: in the past prices moved higher on 14 days while they fell 11 times. Yet, they increased three times as often as they fell during the last two price expansions.

DJIA .06 percent
NASDAQ .55 percent
S&P500 .24 percent

Prices moved higher as they more than offset yesterday’s decline. Much of the trading in May offset price changes of the day before, with nine direction changes during the 13 trading days of this month.

Today’s diagram illustrates these offsetting movements.

Further, with the Memorial Day holiday due for celebration this coming Monday, chances are that buyers and sellers will neutralize each other as investors try to even out their positions in the remaining days of this week.

DJIA .97 percent
NASDAQ .85 percent
S&P500 .81 percent

The talk of raising rates by various regional Fed presidents surely is not supportive for asset prices. Indeed, since higher yields translate into lower stock prices, these press announcements are bound to put a damper on bull market expectations.

In general, May is not a hot month for stock prices. Today’s diagram shows that the market was weak and negative in the past. Such downward pressure exists in bull markets and in bear markets.

Yet for 2014 May -so far- shows a better record than in the previous years of this, since 2009, bull market.

DJIA -.83 percent
NASDAQ -.70 percent
S&P500 -.65 percent

Prices moved slightly higher, scoring the second advance in as many days. This combination follows two successive losses – a rare pattern. Further, it is a bull market combination – with only one appearance during bear markets, whereas the other 14 occurred when prices were trending higher.

Note that just about half of these days are in the current expansion, with the last one about two months ago, on March 18.

The diagram locates these days; it also shows that losses and gains were about even on the following day.

DJIA .12
NASDAQ .86
S&P500 .38

Today’s closing pattern was seen just once, on June 13 2000, just before prices continued their decline that continued for almost another year. Our diagram shows that it came some 124 days after the market high of March 2000. That time profile is quite similar to recent market visits to highs and then retreating before continuing to post another, higher close.

DJIA .12 percent
NASDAQ -.33 percent
S&P500 .04 percent

Today, 26 trading days after the latest high in April, prices remain nearly unchanged. This continuation is very different from previous encounters with market tops. Consider their different time paths as shown in today’s diagram. When the two earlier bull markets ended, in 2000 and 2007, prices fell by ten percent in the first 30 days. The current pattern is substantially different, with prices remaining near their April high.

This variance could mean that the current market has not yet run out of steam, that the current price stability means the bull market still has not reached its top. Such a conclusion seems unlikely with this expansion now celebrating its 1300th trading day since the last market trough in March 2009.

Nevertheless, it could also mean that a secular reduction in daily volatility – which would be expected given the advances in computer technology that enables rapid reaction to price changes and investor expectations.

DJIA .20 percent
NASDAQ .50 percent
S&P500 .15 percent