After Breaking a Major Bottom at 1400, S&P Fighting to Hold Next Level of Support at 1300
By
Rennie on Thursday, March 13th, 2008 at 11:30 pm
The S&P500 traded as low as 1282 in Thursday’s session before staging a dramatic reversal. At the close, the S&P was up 0.5% at 1315. It wouldn’t be surprising to see some backing and filling short-term, especially considering that recovery sessions like Thursday are often followed by a lower close within the next 1-2 days (see my August 12th column for a recent track record). But it also wouldn’t be surprising to see the period of consolidation followed by another push to the upside.
Since 1970, we find only seventeen sessions similar to Thursday in that the S&P traded down 2% or more intraday but finished higher. Note that in only three cases was the S&P significantly lower one week later…
S&P500 -2% Intraday, Closes Higher
03/13/08… S&P500 ??? one week later
01/23/08… S&P500 +1.3% one week later
08/16/07… S&P500 +3.6% one week later
07/24/02… S&P500 +8.1% one week later
07/11/02… S&P500 -4.9% one week later
03/01/01… S&P500 +1.9% one week later
09/21/98… S&P500 +2.4% one week later
10/28/97… S&P500 +2.1% one week later
03/31/94… S&P500 +0.3% one week later
10/28/87… S&P500 +6.7% one week later
10/20/87… S&P500 -1.5% one week later
02/17/83… S&P500 +1.6% one week later
09/28/81… S&P500 +3.4% one week later
10/30/78… S&P500 +0.1% one week later
10/04/74… S&P500 +14.1% one week later
09/20/74… S&P500 -7.4% one week later
09/18/74… S&P500 -0.2% one week later
09/29/72… S&P500 -0.8% one week later
Program activity remains light. Last week’s program trading report reveals that only 30.2% of total program volume was executed as principal for member firms’ own accounts. Similar to the late-2000 period, this statistic continues to drag along near multi-year lows despite the sharp selloff over the past six months. Normally such a drop would have produced a big spike in principal program activity. The fact that it hasn’t suggests a longer-term bottom is not at hand. This doesn’t negate studies (mostly sentiment-based) calling for higher prices over the next 2-3 weeks, but it calls into question the longer-term sustainability of any intermediate-term advance.
We’re now witnessing quite the battle unfold as the S&P attempts to hold onto the most recent major market low at SPX 1300 (as defined by a spike in new 52-week lows). I discussed the significance of this level in Monday’s column and noted… “Just as it was a longer-term bearish sign when the S&P convincingly broke the August/November lows from last year, it would be yet another bearish sign if the S&P bottoms out short-term but isn’t able to convincingly move back above 1300.” So far the jury is still out regarding the ‘convincing’ part, but we’re certainly seeing buyers mount a vigorous defense.
After Breaking a Major Bottom at 1400, S&P Fighting to Hold Next Level of Support at 1300
By Rennie on Thursday, March 13th, 2008 at 11:30 pmThe S&P500 traded as low as 1282 in Thursday’s session before staging a dramatic reversal. At the close, the S&P was up 0.5% at 1315. It wouldn’t be surprising to see some backing and filling short-term, especially considering that recovery sessions like Thursday are often followed by a lower close within the next 1-2 days (see my August 12th column for a recent track record). But it also wouldn’t be surprising to see the period of consolidation followed by another push to the upside.
Since 1970, we find only seventeen sessions similar to Thursday in that the S&P traded down 2% or more intraday but finished higher. Note that in only three cases was the S&P significantly lower one week later…
S&P500 -2% Intraday, Closes Higher
03/13/08… S&P500 ??? one week later
01/23/08… S&P500 +1.3% one week later
08/16/07… S&P500 +3.6% one week later
07/24/02… S&P500 +8.1% one week later
07/11/02… S&P500 -4.9% one week later
03/01/01… S&P500 +1.9% one week later
09/21/98… S&P500 +2.4% one week later
10/28/97… S&P500 +2.1% one week later
03/31/94… S&P500 +0.3% one week later
10/28/87… S&P500 +6.7% one week later
10/20/87… S&P500 -1.5% one week later
02/17/83… S&P500 +1.6% one week later
09/28/81… S&P500 +3.4% one week later
10/30/78… S&P500 +0.1% one week later
10/04/74… S&P500 +14.1% one week later
09/20/74… S&P500 -7.4% one week later
09/18/74… S&P500 -0.2% one week later
09/29/72… S&P500 -0.8% one week later
Program activity remains light. Last week’s program trading report reveals that only 30.2% of total program volume was executed as principal for member firms’ own accounts. Similar to the late-2000 period, this statistic continues to drag along near multi-year lows despite the sharp selloff over the past six months. Normally such a drop would have produced a big spike in principal program activity. The fact that it hasn’t suggests a longer-term bottom is not at hand. This doesn’t negate studies (mostly sentiment-based) calling for higher prices over the next 2-3 weeks, but it calls into question the longer-term sustainability of any intermediate-term advance.
We’re now witnessing quite the battle unfold as the S&P attempts to hold onto the most recent major market low at SPX 1300 (as defined by a spike in new 52-week lows). I discussed the significance of this level in Monday’s column and noted… “Just as it was a longer-term bearish sign when the S&P convincingly broke the August/November lows from last year, it would be yet another bearish sign if the S&P bottoms out short-term but isn’t able to convincingly move back above 1300.” So far the jury is still out regarding the ‘convincing’ part, but we’re certainly seeing buyers mount a vigorous defense.