When Advancing Issues Outnumber Declining Issues by more than a 5:1 Margin

Stock indexes gapped higher Tuesday and never looked back. Advancing issues
outnumbered decliners by a wide 8:1 margin on the NYSE, and volume associated
with advancing issues accounted for over 90% of total volume. It's not
uncommon to see a lower close following such a lopsided session, but the
market has a notable tendency to remain on fairly steady ground in the two
days following a 5:1+ positive breadth session. There have been a total of 25
such sessions since 1980, only three of which led to an S&P down more than
0.5% two sessions later. This indicates a pullback on Wednesday could prove to
be a short-term buying opportunity.

5-1 Positive Breadth on the NYSE
03/18/08... S&P500 ??? two sessions later
03/11/08... S&P500 -0.4% two sessions later
11/28/07... S&P500 +0.8% two sessions later
09/18/07... S&P500 -0.1% two sessions later
08/31/07... S&P500 -0.1% two sessions later
08/29/07... S&P500 +0.7% two sessions later
08/17/07... S&P500 +0.1% two sessions later
08/15/06... S&P500 +0.9% two sessions later
07/19/06... S&P500 -1.6% two sessions later (*)
06/29/06... S&P500 +0.6% two sessions later
04/05/94... S&P500 +0.6% two sessions later
08/21/91... S&P500 +0.9% two sessions later
01/17/91... S&P500 +0.9% two sessions later
08/27/90... S&P500 +0.9% two sessions later
01/04/88... S&P500 +1.2% two sessions later
10/30/87... S&P500 -0.4% two sessions later
10/21/87... S&P500 -3.9% two sessions later (*)
01/05/87... S&P500 +1.3% two sessions later
01/02/87... S&P500 +2.6% two sessions later
08/02/84... S&P500 +2.9% two sessions later
11/03/82... S&P500 -0.5% two sessions later
10/11/82... S&P500 +1.7% two sessions later
08/17/82... S&P500 +0.1% two sessions later
01/28/82... S&P500 -1.0% two sessions later (*)
04/22/80... S&P500 +0.9% two sessions later
03/28/80... S&P500 +1.5% two sessions later

It's also noteworthy that the next two days encompass the session prior to the
Good Friday holiday. Seasonally, there's limited downside potential on the
session prior to this holiday. In the table below is a rundown of the S&P's
performance on the day prior to Good Friday every year since 1980. While it's
a mixed bag in terms of whether the market finishes higher or lower, notice
that downside potential is typically limited to 0.5% or less. In only one year
out of the last twenty-eight did the S&P close down more than 0.5%...

Session Prior to Good Friday Holiday
04/03/80... S&P500 -0.5%
04/16/81... S&P500 +0.4%
04/08/82... S&P500 +0.7%
03/31/83... S&P500 -0.3%
04/19/84... S&P500 +0.1%
04/04/85... S&P500 -0.0%
03/27/86... S&P500 +0.7%
04/16/87... S&P500 +0.9%
03/31/88... S&P500 +0.3%
03/23/89... S&P500 -0.5%
04/12/90... S&P500 +0.7%
03/28/91... S&P500 -0.0%
04/16/92... S&P500 -0.1%
04/08/93... S&P500 -0.2%
03/31/94... S&P500 +0.1%
04/13/95... S&P500 +0.4%
04/04/96... S&P500 -0.0%
03/27/97... S&P500 -2.1% (*)
04/09/98... S&P500 +0.8%
04/01/99... S&P500 +0.6%
04/20/00... S&P500 +0.5%
04/12/01... S&P500 +1.5%
03/28/02... S&P500 +0.2%
04/17/03... S&P500 +1.6%
04/08/04... S&P500 -0.1%
03/24/05... S&P500 -0.1%
04/13/06... S&P500 +0.1%
04/05/07... S&P500 +0.3%
03/20/08... S&P500 ???

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

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