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Performance Anxiety



The NDX recorded the third consecutive +1% or more close yesterday. This is an unusual pattern and worthy of a few observations. The most recent occurrence was April 5, 2004. As the chart below illustrates, the index made an important high that day. I'm not implying the same thing will happen here but a 1-2 day pause appears likely. Mostly, I think the pattern highlights the amount of performance anxiety in the markets. Higher prices are increasing the fear of missing. I say this because Hoofy never accomplished this feat (three +1% or more consecutive closes) during the entire rally from March 2003 to January 2004. Remember, the NDX gained roughly 65% during that period.

Since March 2000, we've seen this pattern 19 times. The next day closed lower 13 of 19 and the index scored another 1% up day just 4 times. If that were to occur, it's worth noting (in those 4 cases) the fifth day's action was consistent. In each observation, the NDX gapped lower the following day and never saw positive prices. Remember past performance does not indicate future results.

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