Stock Markets Lack Synchronization This Week
July 10, 2008
The three largest developed nation-state economies are the United States, Japan, and Germany, and often their stock markets move directionally in tandem. But over the first three days of this week, the U.S. Dow fell Monday, rose Tuesday, and fell on Wednesday, while the German Dax and Japanese Nikkei rose Monday, fell Tuesday, and rose on Wednesday. As if by some grand design, moreover, each market reversed direction moving from day to ensuing day. It’s very doubtful that such a pattern will hold for an entire calendar week.
| Monday | Tuesday | Wednesday | |
| DJIA | -0.5% | +1.4% | -2.1% |
| Nikkei | +0.9% | -2.4% | +0.1% |
| Dax | +2.0% | -1.4% | +1.3% |
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The pattern of daily reversals in the direction of equity markets at intermediate term low points is actually typical in this market context and will continue as long as the relevant indicators move from their highly positive lowpoints to the highly negative range a quantum level above the lowpoints. Reversals are more likely to occur after moves of greater magnitude in this range. Recent examples of this phenomenon occurred on January 11, 14 and 15, on March 11, 12, 13 and 14, March 18, 19 and 20, and in the last few days as noted with the exception that the Nasdaq 100 was positive on Monday while the other major indexes were negative. Inevitably the pattern of reversals pulls the markets out of the lowpoint range to a range where one day reversals are more the exception than the rule.