Unusually Light SPY Volume as the Index Touches a One-Month High Has Negative Short-term Implications

Breadth settled positive on the big board for the sixth day in a row, keeping
the McClellan in overbought territory (over +150) for a fifth day. That
reflects some interesting persistence on the part of the market here. There
have only been five other times since 1990 and only eight times since 1970 in
which the McClellan held over +150 five days in a row. Not a statistically
significant sample, but in every case but one the S&P was trading at a higher
level one month later.

Short-term, the market continues to look vulnerable. Volume in the S&P500
tracking stock (SPY) hit its lowest level in over thirty days Monday,
reinforcing the trend of unusually light institutional participation that's
been in effect the last two weeks. It's historically not a positive sign to
see SPY volume hit a one-month low on the same day that the SPY itself touches
a one-month high (as occurred Monday). The last thirty times this has occurred
are noted in the table below. Note that the consistent theme of limited upside
potential over the next three sessions, particularly in recent years. The SPY
hasn't gained more than 0.6% in any of the last sixteen occurrences since
2000, and in only three cases out of the last thirty occurrences stretching
back to 1997...

SPY Hits One-Month High, Volume At One-Month Low
04/07/08... SPY ??? three sessions later
04/05/07... SPY -0.2% three sessions later
02/15/07... SPY +0.1% three sessions later
11/22/06... SPY -1.4% three sessions later
07/03/06... SPY -0.9% three sessions later
08/03/05... SPY -1.7% three sessions later
05/26/05... SPY +0.4% three sessions later
02/08/05... SPY +0.5% three sessions later
12/30/04... SPY -1.9% three sessions later
08/27/04... SPY -0.1% three sessions later
04/05/04... SPY -0.8% three sessions later
11/29/02... SPY -1.6% three sessions later
10/28/02... SPY -1.2% three sessions later
11/19/01... SPY -0.1% three sessions later
11/13/01... SPY -0.2% three sessions later
11/06/00... SPY -2.6% three sessions later
08/21/00... SPY +0.5% three sessions later
12/27/99... SPY +0.3% three sessions later
11/15/99... SPY +1.8% three sessions later (*)
07/16/99... SPY -2.8% three sessions later
04/26/99... SPY -1.7% three sessions later
03/18/99... SPY -4.6% three sessions later
12/24/98... SPY +0.5% three sessions later
11/06/98... SPY -1.6% three sessions later
07/20/98... SPY -3.7% three sessions later
04/22/98... SPY -3.9% three sessions later
03/18/98... SPY +0.6% three sessions later
02/09/98... SPY +1.3% three sessions later (*)
02/03/98... SPY +0.9% three sessions later (*)
05/23/97... SPY -0.2% three sessions later
05/15/97... SPY +0.1% three sessions later

Also noteworthy is that the Equal Weight S&P posted its sixth consecutive up
day Monday. Typically this has meant a close below today's settlement is
likely within the next few days. Each of the last thirty occurrences is noted
in the table below. Note that the index posted a subsequently lower close
within three days in twenty-six cases, or 86% of the time, significantly above
the 65% at-any-time odds for a lower close within three days.

Equal Weight S&P Closes Up Six Days in a Row
06/04/07... Lower SPXEW close one session later
04/05/07... Lower SPXEW close three sessions later
01/16/07... Lower SPXEW close one session later
09/05/06... Lower SPXEW close one session later
03/17/06... Lower SPXEW close one session later
01/10/06... Lower SPXEW close two sessions later
11/23/05... Lower SPXEW close two sessions later
09/29/05... Lower SPXEW close two sessions later
07/14/05... Lower SPXEW close two sessions later
05/23/05... Lower SPXEW close one session later
12/15/04... Lower SPXEW close one session later
11/01/04... Lower SPXEW close one session later
05/28/04... Lower SPXEW close three sessions later
04/05/04... Lower SPXEW close one session later
12/01/03... Lower SPXEW close one session later
11/03/03... Lower SPXEW close one session later
09/03/03... Lower SPXEW close two sessions later
11/07/01... Lower SPXEW close one session later
05/21/01... Lower SPXEW close one session later
05/02/01... Lower SPXEW close one session later
09/07/00... No lower close within three sessions
08/07/00... Lower SPXEW close three sessions later
07/02/99... Lower SPXEW close one session later
11/19/98... No lower close within three sessions
11/05/98... Lower SPXEW close two sessions later
10/21/98... Lower SPXEW close two sessions later
06/12/97... No lower close within three sessions
05/05/97... Lower SPXEW close one session later
11/11/96... No lower close within three sessions
05/15/96... Lower SPXEW close one session later

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

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