When S&P Futures Open Down and Close Above the Open Three Consecutive Days

Blue chip averages remained well bid Tuesday, leading to another day of solid
outperformance by the S&P500. Tuesday nearly marked the third day in a row
that the SPX has more than doubled the gain of the NDX, a feat never
accomplished in the last twenty years. The rally kept the S&P100 Volatility
Index in technically oversold territory for a second day. The short-term sell
setup discussed at the end of Monday evening's commentary can still trigger a
sell in the next few sessions, now on a break of today's low at OEX 626.68.

Noteworthy that NYSE volume continues to flatline around the 1.5 billion share
level (see my February 20th commentary for a recent discussion.) This has sent
the 20-day moving average of the Nasdaq/NYSE Volume Ratio above the 1.50
level, a longer-term negative for stocks.

Volume associated with advancing issues accounted for over 70% of total big
board volume Tuesday. That triggers an '80/60' setup given that it comes on
the heels of Monday's 80%+ up volume session. However, note that five of the
last six 80/60 signals have been proven wrong, an unusually weak showing for a
setup that's been quite accurate historically (see recent track record). This
brings to mind another bullish setup that's experienced an unprecedented
string of losses - the S&P's recent inability to rally in the two months
following a 90% down volume session (see my January 7th column for the
discussion). The failure of historically accurate bullish setups, both short
and long-term, is a subtle but potentially important clue regarding the
general health of the market.

S&P futures have opened lower but managed to close positive both Monday and
Tuesday of this week. Should this pattern of a down open and close above the
open persist for a third day, it would have generally negative implications
for the short-term. The last thirty times the front-month S&P contract opened
lower but settled above the opening print three days in a row are listed in
the table below. While the odds of a lower S&P over the next two sessions is
only about 60/40, upside potential is typically capped. In only four cases out
of the last thirty did the S&P gain 0.5% or more...

S&P Futures Open Down, Close Above Open Three Days
05/09/07... S&Ps -0.2% two sessions later
02/20/07... S&Ps -0.2% two sessions later
11/21/06... S&Ps -0.2% two sessions later
10/25/06... S&Ps -0.3% two sessions later
10/05/06... S&Ps -0.1% two sessions later
01/18/06... S&Ps -1.5% two sessions later
11/25/05... S&Ps -0.9% two sessions later
12/16/04... S&Ps -0.7% two sessions later
10/29/04... S&Ps +0.0% two sessions later
05/14/04... S&Ps -0.4% two sessions later
12/24/03... S&Ps +1.4% two sessions later (*)
08/27/03... S&Ps +1.2% two sessions later (*)
06/05/03... S&Ps -1.4% two sessions later
10/22/02... S&Ps -1.2% two sessions later
10/03/01... S&Ps -0.2% two sessions later
12/28/00... S&Ps -4.0% two sessions later
08/29/00... S&Ps +0.2% two sessions later
07/08/99... S&Ps +0.3% two sessions later
10/16/98... S&Ps +0.7% two sessions later (*)
11/11/96... S&Ps +0.0% two sessions later
11/03/95... S&Ps -0.7% two sessions later
09/19/95... S&Ps -0.6% two sessions later
03/06/95... S&Ps -0.6% two sessions later
01/25/95... S&Ps +0.4% two sessions later
09/16/94... S&Ps -1.8% two sessions later
07/28/94... S&Ps +1.3% two sessions later (*)
05/27/94... S&Ps +0.3% two sessions later
10/29/93... S&Ps +0.1% two sessions later
11/13/92... S&Ps -0.8% two sessions later
09/30/92... S&Ps -2.0% two sessions later

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

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