Daily Stock Market Trends

Trends are part of stock market activity.stock market analysis screenshot image by .shock from Fotolia.com

Nearly a century ago, Charles Dow was the first to define a "trend" in the financial markets. The "Dow Theory" states that a stock is trending up when it creates a sequence of "higher highs and higher lows." This jagged but positively-sloped fluctuation in prices is now a standard concept among traders. When scanning for daily stock market trends, identifying this pattern is easy. But it is still helpful to see examples of past daily stock market trends.

2009 Bull Market

In March 2009 the U.S. stock market reached multiyear lows due to an extraordinary collapse of the financial system. When the bear market ended, the stock market entered a clear up trend for most of the rest of 2009. The first four months of 2010 continued this trend. This up trend and bear market recovery is easily spotted on a daily chart of the S&P 500. This stock market index is a barometer for the overall U.S. stock market. After stocks bounced from their March 2009 lows, a sequence of higher highs and higher lows took place until the summer of that year. A two-month "correction" gave the trend a pause before resuming in July 2009. Another pause occurred during January of 2010 before the trend continued for three more months. This daily stock market trend was particularly strong and impressive, as few stock market trends last this long.

The extraordinary bear market that started at the end of 2007 and lasted until March 2009 is an example of the force of a down trend. A study of daily charts of the S&P 500 reveals just how clear this pattern of "lower lows and lower highs" appears on trending charts. The decline was fierce and without respite. This exemplifies a common understanding among traders that markets fall much faster than they rise. The power of fear tends to be stronger than the power of greed. A lower high appeared in November of 2007 that led to a steady decline until March 2008. Then, the market rallied strongly but still ended this rise with yet another lower high that summer. The next lower high appeared at the beginning of fall that year. A major breakdown then occurred leading to the next lower high at the turn of 2009. The down trend in the daily stock market charts is clear and demonstrates the concepts of Dow Theory.

While the financial markets were falling in 2008 and 2009, an exchange traded fund of the stock market, the "GLD" trust, was steadily rising in an up trend. GLD is a stock that tracks the performance of gold. Investors who purchase shares in this stock can expect returns comparable to the physical purchase of gold bullion outright. The daily stock market trend of GLD during the bear market shows how supply and demand can be simultaneously contrary for different investment vehicles. Gold continued a positive trend for five months after the overall stock market entered a down trend. GLD then fell in a much shorter down trend for six months in 2008 before starting another up trend that continued well into 2010.