S&P Futures Post an Unfilled Upside Gap, But Black Candlestick Suggests Gap Will be Filled

Nasdaq breadth closed better than 3:1 positive Friday. Over the last decade,
there have been twenty separate sessions in which advancing issues outnumbered
declining issues by more than a 3:1 margin on the NASDAQ exchange. Each
instance is noted in the table below, along with the performance of the NDX
the following day. Note that in only one case did the Nasdaq gain more than
0.5%, suggesting limited upside potential on Monday…

Nasdaq Breadth 3:1 Positive
09/19/08… NDX ??? next day
07/16/08… NDX +0.5% next day
04/01/08… NDX -0.4% next day
03/18/08… NDX -2.6% next day
11/28/07… NDX +0.3% next day
11/23/07… NDX -2.0% next day
09/18/07… NDX +0.3% next day
08/29/07… NDX +0.5% next day
03/06/07… NDX -0.4% next day
10/12/06… NDX +0.5% next day
08/15/06… NDX +2.3% next day (*)
07/19/06… NDX -1.6% next day
06/29/06… NDX -0.7% next day
06/15/06… NDX -0.7% next day
03/12/04… NDX -2.2% next day
11/27/02… NDX -0.9% next day
10/15/02… NDX -4.2% next day
04/05/01… NDX -4.7% next day
01/03/01… NDX -2.7% next day
06/02/00… NDX -0.7% next day
04/18/00… NDX -3.6% next day

NYSE breadth settled nearly 7:1 in favor of advancing issues Friday. 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 27
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 Monday could lead to
another upside try on Tuesday…

5-1 Positive Breadth on the NYSE
09/19/08… S&P500 ??? two sessions later
04/01/08… S&P500 -0.1% two sessions later
03/18/08… S&P500 -0.1% 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

Friday represented the first time since 2002 that we’ve seen back-to-back
gains of 2%+ for the S&P500. In the table below I’ve noted every instance
since 1970 in which the S&P closed up 2%+ two days in a row. Note that in
every case but one the S&P posted a subsequently higher close at some point
over the following week…

S&P500 +2% Two Consecutive Days
09/19/08… ???
10/11/02… Higher S&P close one session later
08/08/02… Higher S&P close one session later
08/07/02… Higher S&P close one session later
04/18/00… Higher S&P close four sessions later
03/16/00… Higher S&P close one session later
09/14/98… Higher S&P close one session later
10/19/90… Higher S&P close one session later
12/08/87… Higher S&P close one session later
10/30/87… Higher S&P close one session later
10/21/87… No higher close within five sessions
08/03/84… Higher S&P close one session later
08/02/84… Higher S&P close one session later
10/07/82… Higher S&P close one session later
08/23/82… Higher S&P close two sessions later
09/19/75… Higher S&P close five sessions later
01/02/75… Higher S&P close one session later
10/30/74… Higher S&P close four sessions later
10/10/74… Higher S&P close one session later
12/27/73… Higher S&P close four sessions later
12/07/73… Higher S&P close one session later
05/29/70… Higher S&P close one session later
05/28/70… Higher S&P close one session later

The fact that the S&P gained over 1% on Friday’s expiration as well as the
fact that we’re in a weak seasonal time frame until the end of the month
suggests generally limited upside potential heading into the end of the month.
See Thursday evening’s column for details. And let’s not forget that S&P
futures posted an unfilled upside gap on Friday that coincided with a black
candlestick. This reflects short-term weakness, as the market lost upside
momentum soon after the opening. The last thirty occurrences of an unfilled
upside gap in the front-month S&P futures contract that coincided with a black
candlestick are listed in the table below. Note that in only four cases out of
thirty was the gap not filled at some point over the next five sessions,
suggesting we’ll most likely see December S&Ps trade back down to the 1218
level by the end of the week…

S&P Futures Unfilled Upside Gap w/ Black Candlestick
09/19/08… ???
09/08/08… Gap filled one day later
04/18/08… Gap filled two days later
09/19/07… Gap filled one day later
08/17/07… Gap not filled within a week
06/15/07… Gap filled two days later
06/17/05… Gap filled one day later
10/04/04… Gap filled one day later
04/02/04… Gap filled four days later
10/03/03… Gap not filled within a week
07/14/03… Gap filled one day later
11/04/02… Gap filled two days later
10/17/02… Gap filled one day later
03/06/01… Gap filled three days later
11/27/00… Gap filled one day later
06/02/00… Gap not filled within a week
09/27/99… Gap filled one day later
10/12/98… Gap filled one day later
12/20/96… Gap filled one day later
10/13/95… Gap filled one day later
10/13/94… Gap filled one day later
06/12/92… Gap filled one day later
10/19/90… Gap filled four days later
01/19/90… Gap filled one day later
07/11/89… Gap filled three days later
06/22/88… Gap filled two days later
06/14/88… Gap filled two days later
01/15/88… Gap filled three days later
01/05/88… Gap filled one day later
11/12/87… Gap filled two days later
06/12/87… Gap not filled within a week

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

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