When the S&P Fails to Rally on a 2%+ Up Day for the BKX

The Philadelphia Bank Index (BKX) settled up over 2% Wednesday, which normally
means a solid rally day for the broad market as well. But the S&P500 struggled
all session and ended down 0.6% at 1373, a fairly weak showing. Today marked
the first time since 2000 that the S&P has failed to rally on a 2%+ up day for
the Bank Index. Looking back at all ten previous instances 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…

BKX Up over 2%, S&P500 Closes Lower
01/16/08… S&P500 ??? three sessions later
09/08/00… S&P500 -0.6% three sessions later
05/23/00… S&P500 +0.3% three sessions later
05/08/00… S&P500 -1.2% three sessions later
04/10/00… S&P500 -4.3% three sessions later
01/26/00… S&P500 -0.7% three sessions later
01/12/00… S&P500 +1.6% three sessions later
01/07/99… S&P500 -2.4% three sessions later
04/13/98… S&P500 -0.1% three sessions later
04/06/98… S&P500 -1.0% three sessions later
08/28/95… S&P500 +0.5% three sessions later

Another sign of weakness on Wednesday was the fact that the S&P settled down
over 0.5% on the heels of Tuesday’s 90%+ down volume session. Since 1980,
we’ve seen a total of 48 separate 90% down volume sessions, only nine of which
saw the S&P close down more than 0.5% the next session, or about one out of
every five occurrences. When this has occurred, the S&P typically drops
another 1% (intraday) in the next 1-3 sessions…

90% Down Volume, SPX Off More Than 0.5% Next Day
01/16/08… SPX ???
08/15/07… SPX -2.6% intraday one session later
07/27/07… SPX -1.3% intraday three sessions later
03/11/03… SPX -1.5% intraday one session later
08/28/98… SPX -6.8% intraday one session later
01/15/90… SPX -1.1% intraday one session later
10/19/87… SPX -3.8% intraday one session later
09/12/86… SPX -1.0% intraday two sessions later
07/08/86… SPX -0.8% intraday two sessions later
01/08/81… SPX -1.0% intraday one session later

The NYSE TRIN5 indicator, a running summation of the last five days’ closing
TRIN values, settled in ‘market oversold’ territory (over 6.0) for the twelfth
consecutive session Wednesday. That’s extremely unusual. In the thirty-year
history of the TRIN5, nearly all prior instances occurred in 2002, when the
market was undergoing bouts of extreme selling. Interestingly, the market
typically continued to struggle over the following week…

TRIN5 Over 6.0 Twelve Sessions
01/16/08…
08/08/07… S&P -6.1% five sessions later
07/19/04… S&P -1.5% five sessions later
09/30/02… S&P -3.7% five sessions later
07/08/02… S&P -6.1% five sessions later
06/12/02… S&P -0.0% five sessions later
05/08/02… S&P +0.2% five sessions later
01/18/02… S&P +0.5% five sessions later
08/21/01… S&P +0.4% five sessions later

Of course, the Fed could wreak havoc with those short-term bearish setups if
it surprises the market with an aggressive intermeeting cut. Institutional
investors appear to believe this is a very real possibility, which would
explain their steady buying over the past six sessions even as the market has
traded lower. TICKscore closed at a solid +22, its sixth consecutive session
in positive territory. So far, stocks haven’t responded, which could be viewed
as a sign of underlying weakness. If the Fed doesn’t act, the market’s likely
to remain under pressure short-term.

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

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