Skip to main content

Is the Market Trading in the Same Pattern It Followed Before the Dot-Com Bubble Burst?

Last week's four-day inverse close is grabbing attention from active market players and historians.
  • Author:
  • Publish date:

The U.S. stock market is showing some of the same trading patterns that were evident before the internet bubble burst in 2000, a new analysis argues, with two major indices trading inversely regularly.

The Dow Jones Industrial Average DJLA and Nasdaq Composite COMP have closed in opposite directions — with one being up and the other down at close — in four consecutive trading sessions before Thanksgiving, with only a single percentage point difference in their returns. 

Such a divergence is extremely rare, according to Mark Hulbert, who makes the argument over at Market Watch that it deserves scrutiny, and is similar to a pattern seen in the weeks leading up to the March 2000 dot-com bubble burst

Since the Nasdaq was created in 1971, that bifurcation has only occurred in 22% of trading sessions.

TheStreet Recommends

On average, there is such a divergence once every five sessions, so last week's four-day run has grabbed attention from active market players and historians.

In the weeks leading up to the March 2000 dot-com bubble burst, more than half the trading sessions saw the Nasdaq and Dow mix closes, according to Hulbert.

TheStreet Recommends: What Inflation's History Tells Investors