Sharp Selloff in Bond Market Tilts the Odds in Favor of an S&P Bounce Wednesday

Historically, the S&P is about twice as likely to close higher when the bond
market sells off sharply. When it tries and fails, as was the case Tuesday,
there's often another upside try the following day. The table below lists the
last thirty instances in which the S&P posted higher highs, higher lows but a
lower close on the same day that the TNX (yield on the 10-year) closed up 1%
or more. Note that downside potential is typically limited the following
session. In only three cases out of thirty did the S&P settle down more than
0.5% the next day, while it gained more than 0.5% thirteen times...

S&P500 Higher Highs, Higher Lows, Lower Close, TNX +1%
05/13/08... S&P500 ??? next session
04/02/08... S&P500 +0.1% next session
02/19/08... S&P500 +0.8% next session
01/30/08... S&P500 +1.7% next session
12/07/07... S&P500 +0.8% next session
05/17/07... S&P500 +0.7% next session
10/25/05... S&P500 -0.4% next session
06/10/05... S&P500 +0.2% next session
09/03/04... S&P500 +0.7% next session
08/23/04... S&P500 +0.1% next session
05/19/04... S&P500 +0.1% next session
05/13/04... S&P500 -0.1% next session
03/26/04... S&P500 +1.3% next session
01/20/04... S&P500 +0.8% next session
11/28/03... S&P500 +1.1% next session
10/30/03... S&P500 +0.4% next session
10/15/03... S&P500 +0.3% next session
08/20/03... S&P500 +0.3% next session
08/13/03... S&P500 +0.7% next session
07/28/03... S&P500 -0.7% next session (*)
07/24/03... S&P500 +1.7% next session
06/27/03... S&P500 -0.2% next session
04/11/03... s&P500 +2.0% next session
02/05/03... S&P500 -0.6% next session (*)
09/11/02... S&P500 -2.5% next session (*)
03/07/02... S&P500 +0.6% next session
02/26/02... S&P500 +0.1% next session
02/12/02... S&P500 +1.0% next session
11/20/01... S&P500 -0.5% next session
10/04/01... S&P500 +0.2% next session
09/04/01... S&P500 -0.1% next session

Looking beyond Wednesday, the market appears vulnerable to further downside
given the recent underperformance among S&P large caps. Note that while the
SPX is trading above last Thursday's settlement, the S&P100 (OEX) hasn't
managed to keep up and today settled below its three-day ago close. That's a
subtle but potentially telling divergence, as the SPX and OEX typically move
in lockstep. Since 1990, there have only been seventeen instances in which the
SPX was up 0.3% or more over a three-day period while the OEX lost ground in
the same period of time (as is the case currently). In every case but one the
S&P posted a subsequently lower close within the next few sessions...

SPX +0.3% Over Three Days, OEX Down
05/13/08... SPX ???
02/20/07... SPX -0.1% one session later
10/24/05... SPX -0.2% one session later
07/05/05... SPX -0.8% one session later
04/22/04... SPX -0.4% two sessions later
08/21/03... SPX -1.0% one session later
01/24/02... SPX -2.8% three sessions later
12/29/00... SPX -2.8% one session later
08/17/00... SPX -0.3% one session later
04/04/00... SPX -0.5% one session later
12/30/99... SPX -0.6% two sessions later
01/15/99... SPX -0.7% three sessions later
12/30/98... SPX -0.2% one session later
03/06/98... SPX -0.3% one session later
08/31/94... SPX -0.5% one session later
05/25/94... SPX +0.0% three sessions later
07/02/92... SPX -0.6% two sessions later
09/20/91... SPX -0.5% one session later

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

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