S&P500 Posts its Largest One-Day Range in Over a Year, Closes Higher

Correction: In Tuesday evening’s column the table of ’900+ New 52-week Lows’
incorrectly listed 8/21/98 as one of the dates. That should have read 8/31/98.

The S&P500 (cash) drew an outside bar Wednesday after trading below Tuesday’s
low and above Tuesday’s high. That’s not unusual itself, but it is unusual to
see the S&P gain 2% and draw an outside bar. There have only been eleven other
sessions since 1990 in which the S&P drew an outside bar and closed up 2% or
more. Interestingly, all occurrences were in the 2000-2003 period, indicating
the pattern is a hallmark of a high volatility environment. Out of eleven
occurrences, nine led to further gains over the next week…

SPX Closes +2% & Draws Outside Bar
01/23/08… S&P500 ??? one week later
04/22/03… S&P500 +0.7% one week later
03/17/03… S&P500 +0.2% one week later
10/10/02… S&P500 +9.4% one week later
08/14/02… S&P500 +3.2% one week later
07/24/02… S&P500 +8.1% one week later
11/01/01… S&P500 +3.2% one week later
10/10/01… S&P500 -0.4% one week later
05/16/01… S&P500 +0.4% one week later
01/03/01… S&P500 -2.5% one week later
03/21/00… S&P500 +0.9% one week later
03/15/00… S&P500 +7.8% one week later

TICKscore closed at a very high +79 as institutional investors remained
persistently strong buyers throughout Wednesday’s session. Note that
cumulative TICKscore remains in a pattern of higher highs.

Fed funds futures are now pricing in 100% odds of a 1/2 point cut at next
Wednesday’s FOMC meeting and 28% odds of another 3/4 point cut.

Wednesday’s range for the S&P500 was a massive 69 points. That’s the largest
one-day range since April 4th, 2000. Typically, an unusually large range
coincides with a down day for the stock market. Looking back over the past
thirty years worth of daily data, I extracted those instances in which the
S&P500 posted its largest range of the past year. Since 1977, there have been
a total of 36 occurrences. Of those, only 14 coincided with a higher S&P
close. Each of these instances is noted in the table below, along with the
S&P’s performance the following session…

S&P500 Largest Range of Past Year & Higher Close
01/23/08… S&P500 ??? next session
06/15/06… S&P500 -0.4% next session
10/19/05… S&P500 -1.5% next session
05/25/04… S&P500 +0.2% next session
07/24/02… S&P500 -0.6% next session
03/16/00… S&P500 +0.4% next session
10/28/97… S&P500 -0.3% next session
09/02/97… S&P500 +0.0% next session
05/31/95… S&P500 +0.0% next session
08/03/84… S&P500 +0.2% next session
09/28/81… S&P500 +0.4% next session
10/30/78… S&P500 -2.0% next session
08/02/78… S&P500 +0.6% next session
11/10/77… S&P500 +1.3% next session
10/26/77… S&P500 +0.3% next session

You can see that the market is typically quiet after such a large range day,
with the S&P generally settling not far from unchanged levels. Where it gets
interesting is when the time frame is extended to an intermediate-term basis.
The table below lists these same dates along with the S&P’s performance three
weeks (fifteen trading days) later…

S&P500 Largest Range of Past Year & Higher Close
01/23/08… S&P500 ??? three weeks later
06/15/06… S&P500 +0.7% three weeks later
10/19/05… S&P500 +2.1% three weeks later
05/25/04… S&P500 +1.7% three weeks later
07/24/02… S&P500 +9.0% three weeks later
03/16/00… S&P500 +2.9% three weeks later
10/28/97… S&P500 +1.8% three weeks later
09/02/97… S&P500 +2.6% three weeks later
05/31/95… S&P500 +2.0% three weeks later
08/03/84… S&P500 +3.2% three weeks later
09/28/81… S&P500 +3.0% three weeks later
10/30/78… S&P500 +0.2% three weeks later
08/02/78… S&P500 +1.9% three weeks later
11/10/77… S&P500 -0.0% three weeks later
10/26/77… S&P500 +3.6% three weeks later

Instead of mixed results as was the case looking out one session, we can see a
definitive bullish bias looking out fifteen sessions. This tends to indicate
that an unusually large range day with a higher settlement has intermediate-
term positive implications.

The Last Hour indicator surged over 400 points Wednesday given the combination
of a weak first hour and strong last hour. That keeps the indicator in a firm
uptrend, which has generally negative implications on a longer-term basis
given that it’s starting to retrace the massive move down over the past few
years (see my January 15th column for more on this topic.) Also from a longer-
term perspective, keep in mind that a down January invariably leads to a lower
monthly close – see my January 13th column for the track record.

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

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