Over 900 Issues Hit New 52-week Lows for only the Eighth Time in Forty Years

Strikingly, over 900 issues hit new 52-week lows Tuesday. Readings this high
have only been seen on a handful of occasions over the last forty years (see
long-term chart). New lows have exceeded 900 on seven other occasions since
1965. Notably, the stock market was higher one month later in every case,
often significantly higher…

900+ New 52-week Lows on the NYSE
01/22/08… S&P500 ??? one month later
08/16/07… S&P500 +5.2% one month later
07/24/02… S&P500 +12.6% one month later
10/08/98… S&P500 +18.2% one month later
08/27/98… S&P500 +0.2% one month later
08/21/98… S&P500 +9.6% one month later
10/19/87… S&P500 +9.6% one month later
05/25/70… S&P500 +9.1% one month later

The Fed’s “surprise” rate cut finally manifested Tuesday, in anticlimactic
fashion, with a 75 basis point trim about an hour before the market opened.
Reflecting the Fed’s poor timing, the stock market still didn’t manage to
close higher despite the aggressive move. The S&P500 settled down 1.1% at
1310, its fifth consecutive lower close. As I noted in Monday evening’s
column, five down days is typically followed by a higher close the next
session. I’d add that the 2-day RSI for the S&P100 (OEX) also closed in
extreme oversold territory Tuesday (under 2). As I outlined in a discussion of
this oscillator back on January 6th, “Out of thirty signals over the past
decade, twenty-eight led to a higher OEX close by the time the 2-day RSI rose
out of extreme oversold territory, invariably within two days of the signal
date.”

Fed funds futures continue to price in further rate cuts at the late-January
FOMC meeting. The February contract indicates 100% odds of an additional 1/4
point cut and 80% odds of a 1/2 point cut at the January 30th FOMC meeting.

While the market is technically oversold short-term, I would also note that
the market had a heavy feel to it Tuesday. The S&P wasn’t able to close higher
despite persistently positive NYSE TICK action. TICKscore closed at a high
+45, a reading normally associated with a solid up day as it indicates the
TICK spent a lot of Tuesday’s session tagging extreme positive territory. That
should coincide with a rallying market, but today’s morning surge petered out
around 11am ET and the market drifted sideways into the close. That left the
S&P down just over 1% on the session, which has somewhat negative implications
for Wednesday’s session. In the six and a half year history we have of daily
TICKscore readings, there have only been fifteen sessions in which the
TICKscore closed at +25 or higher and the S&P closed down on the session. Each
instance is noted in the table below, along with the performance of the S&P500
the following session…

TICKscore +25 or Higher, S&P500 Closes Down
01/22/08… S&P500 ???
06/28/07… S&P500 -0.2% next session
05/22/07… S&P500 -0.1% next session
03/01/07… S&P500 -1.1% next session
01/09/07… S&P500 +0.2% next session
01/03/07… S&P500 +0.1% next session
12/29/06… S&P500 -0.1% next session
08/30/06… S&P500 -0.0% next session
07/26/06… S&P500 -0.4% next session
06/30/06… S&P500 +0.8% next session
01/10/06… S&P500 +0.4% next session
11/23/04… S&P500 +0.4% next session
07/02/04… S&P500 -0.8% next session
05/14/04… S&P500 -1.1% next session
03/27/03… S&P500 -0.6% next session
08/29/02… S&P500 -0.2% next session

Note that in only one case did the S&P close up more than 0.5%. While the
market is technically oversold and more likely to rally short-term, this
suggests conditions could turn choppy.

Another indication that we may see some backing and filling over the short-
term is the failure of the S&P to close higher despite a 3%+ rally for the
Bank Index (BKX). As I noted in my January 16th column, “when the BKX gained
2%+ and the S&P closed lower, there’s been a notable tendency for the S&P to
continue moving lower over the next few sessions.” In only one case out of
eleven was the S&P up more than 0.5% three sessions later.

Categories : Archived EOD Commentary, End-of-Day Commentary

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