Expansion of New 52-week Lows Despite a Solid Rally Suggests Choppy Conditions in Store

Stocks racked up solid gains Friday, with the S&P and NASDAQ both gaining
better than 2%. Breadth settled in 3:1 positive territory, TICKscore settled
at +17, cumulative TICK +83,000. One negative development on a short-term
basis was Friday's increase in new 52-week lows on both the NYSE and NASDAQ.
This occurred despite the SPX and NDX both tagging their highest level in over
a month, suggesting there were pockets of weakness beneath the surface. This
kind of action typically means limited upside potential for the S&P over the
next three sessions. Every instance in which new 52-week lows expanded on both
exchanges and the NDX and SPX touched a one-month high is noted in the table
below. Note that the S&P's upside potential is typically capped at the 0.5%
level over the next few days. In only four cases out of the last thirty, or
13% of the time did the S&P500 gain more than 0.5% three days later. That's
significantly worse than the S&P's at-any-time odds of 39% for a gain of more
than 0.5% over any three-day period...

SPX & NDX Both Hit a One-Month High,
New 52-week Lows Expand on Both Exchanges
08/08/08... S&P500 ??? three sessions later
05/15/08... S&P500 -0.7% three sessions later
04/02/08... S&P500 +0.4% three sessions later
12/11/07... S&P500 -0.7% three sessions later
10/11/07... S&P500 -1.0% three sessions later
10/09/07... S&P500 -0.2% three sessions later
07/16/07... S&P500 +0.2% three sessions later
07/12/07... S&P500 +0.1% three sessions later
06/01/07... S&P500 -1.2% three sessions later
05/23/07... S&P500 -0.3% three sessions later
05/04/07... S&P500 +0.5% three sessions later
04/17/07... S&P500 +0.9% three sessions later (*)
04/05/07... S&P500 -0.3% three sessions later
04/07/06... S&P500 -0.6% three sessions later
03/21/06... S&P500 +0.4% three sessions later
01/09/06... S&P500 -0.3% three sessions later
11/10/05... S&P500 -0.2% three sessions later
11/12/04... S&P500 -0.2% three sessions later
10/06/04... S&P500 -1.6% three sessions later
09/10/04... S&P500 -0.3% three sessions later
04/05/04... S&P500 -1.0% three sessions later
01/20/04... S&P500 +0.2% three sessions later
10/09/03... S&P500 +1.0% three sessions later (*)
08/22/03... S&P500 +0.4% three sessions later
03/17/03... S&P500 +1.5% three sessions later (*)
12/02/02... S&P500 -3.0% three sessions later
03/08/02... S&P500 -0.9% three sessions later
11/26/01... S&P500 -1.5% three sessions later
10/17/01... S&P500 +1.2% three sessions later (*)
05/22/01... S&P500 -2.4% three sessions later
08/24/00... S&P500 +0.1% three sessions later

This indicates we'll most likely see choppy conditions during the first half
of this coming week. Looking out over the intermediate-term, Friday's session
triggered a two-week buy setup. As I noted in last Wednesday's column... "If
the SPX is still trading above 1284 at Friday's close, an intermediate-term
bullish signal will be triggered (given that the S&P managed to hold firm in
the three sessions following a 3:1 positive breadth day.)" You can view the
track record for this setup in my July 20th column.

Another positive sign for the intermediate-term was the fact that Friday
represented the second 3:1 positive breadth session in just the last week.
Historically, a cluster of such lopsided breadth sessions usually leads to
further upside over the intermediate-term. While this setup's performance is
just below the threshold required to add it to the board, it's still a
generally positive indication lookout out ten trading days. The last thirty
occurrences are listed in the table below...

Two 3:1 Positive NYSE Breadth Days in five sessions
08/05 & 08/08/08... SPX ??? two weeks later
04/16 & 04/18/08... SPX +1.7% two weeks later
03/18 & 03/24/08... SPX +1.7% two weeks later
01/28 & 01/31/08... SPX -2.2% two weeks later
11/23 & 11/28/07... SPX +1.2% two weeks later
10/01 & 10/05/07... SPX -3.7% two weeks later
08/17 & 08/22/07... SPX +1.0% two weeks later
06/27 & 07/02/07... SPX +2.0% two weeks later
06/13 & 06/15/07... SPX -1.9% two weeks later
03/19 & 03/21/07... SPX +0.3% two weeks later
03/06 & 03/08/07... SPX +2.3% two weeks later
11/29 & 12/04/06... SPX +0.9% two weeks later
08/15 & 08/16/06... SPX +0.7% two weeks later
07/24 & 07/28/06... SPX -0.9% two weeks later
07/19 & 07/24/06... SPX +0.8% two weeks later
05/25 & 06/01/06... SPX -2.3% two weeks later
01/31 & 02/04/05... SPX -0.1% two weeks later
11/03 & 11/04/04... SPX +1.9% two weeks later
08/16 & 08/18/04... SPX +1.0% two weeks later
05/30 & 06/04/03... SPX +2.4% two weeks later
04/28 & 05/02/03... SPX +1.5% two weeks later
04/29 & 05/02/97... SPX +2.1% two weeks later
08/01 & 08/02/96... SPX +0.4% two weeks later
12/24 & 12/30/91... SPX +1.3% two weeks later
12/23 & 12/24/91... SPX +4.6% two weeks later
01/30 & 02/04/91... SPX +6.0% two weeks later
01/24/& 01/30/91... SPX +8.2% two weeks later
05/31 & 06/01/88... SPX +2.9% two weeks later
01/04 & 01/05/88... SPX -3.6% two weeks later
12/14 & 12/18/87... SPX +3.8% two weeks later
10/29 & 10/30/87... SPX -2.4% two weeks later

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

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