New 52-week Lows Expand Despite the S&P Hitting Its Highest Level in Three Weeks

Stock indexes settled near unchanged levels Wednesday in choppy, low-volume
trade. S&P futures opened lower but closed above the open, the third day in a
row we've seen this same price pattern. As I noted at the end of Tuesday
evening's column, that's a short-term bearish sign and implies limited upside
potential heading into Friday's close.

While the S&P posted higher highs and higher lows, it's noteworthy that new
52-week highs contracted and new lows expanded, particularly when you consider
the S&P hit its highest level in three weeks (fifteen trading days) Wednesday
and easily held above Tuesday's low (by more than 0.5%). That's not the kind
of session in which you'd expect to see an expansion in new lows.

The NASDAQ advance/decline ratio is signaling the potential for short-term
weakness by declining since Monday in the face of a market rally. If the NDX
simply closes higher on Thursday, that would trigger another short-term sell
setup. The market's already on shaky ground given the deteriorating breadth
and oversold volatility. Any further strength will therefore most likely
represent a selling opportunity. The last thirty times the Nasdaq has closed
higher two days on a declining advance/decline ratio (as occurred today) and
managed to settle higher the next session are listed in the table below, along
with the performance of the NDX the following session. Note that in only three
cases out of thirty did the Nasdaq close up 0.5% or more, while it lost 0.5%
or more seventeen times...

Naz Up Two, A/D Down Two + Higher Close Next Day
01/31/08... Nasdaq100 +0.8% next day (*)
10/31/07... Nasdaq100 -1.9% next day
07/06/07... Nasdaq100 +0.0% next day
05/31/07... Nasdaq100 +0.0% next day
05/09/07... Nasdaq100 -1.6% next day
09/15/06... Nasdaq100 -0.0% next day
08/18/06... Nasdaq100 -1.0% next day
01/11/06... Nasdaq100 -0.6% next day
11/25/05... Nasdaq100 -1.0% next day
11/07/05... Nasdaq100 -0.1% next day
07/13/05... Nasdaq100 +1.0% next day (*)
05/23/05... Nasdaq100 +0.3% next day
05/04/05... Nasdaq100 -0.1% next day
12/06/04... Nasdaq100 -1.9% next day
11/08/04... Nasdaq100 -0.0% next day
10/06/04... Nasdaq100 -1.3% next day
09/14/04... Nasdaq100 -1.3% next day
05/28/04... Nasdaq100 +0.2% next day
09/02/03... Nasdaq100 -0.1% next day
08/21/03... Nasdaq100 -0.8% next day
05/30/03... Nasdaq100 -1.1% next day
04/17/03... Nasdaq100 -0.2% next day
11/06/02... Nasdaq100 -3.8% next day
05/17/02... Nasdaq100 -2.5% next day
03/06/02... Nasdaq100 -0.9% next day
11/05/01... Nasdaq100 +2.9% next day (*)
10/08/01... Nasdaq100 -2.7% next day
05/02/01... Nasdaq100 -4.3% next day
08/24/00... Nasdaq100 -0.5% next day
03/27/00... Nasdaq100 -2.6% next day

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

 Print This Post