High-Volume Decline At a Two-Month Low Not a Short-term Positive

Big board volume surged to its highest level of the year Friday, and more
importantly closed over its upper bollinger band (two standard deviations
above the 20-day moving average). That's been one of the missing ingredients
for a crash scenario. NYSE volume has settled over its upper bollinger band
prior to some of the largest declines over the past forty years, including the
'87 crash, the 1998 'mini-crash' and the 9/11 terrorist attacks. The table
below lists the last thirty instances in which NYSE volume closed more than
two standard deviations above its 20-day average and the S&P settled at its
lowest level of the past two months. Note that in 27 out of 30 cases, or 90%
of the time, the S&P posted a subsequently lower close at some point over the
next five trading days. That's significantly better than the 72% at-any-time
odds of a lower S&P close within five days. This indicates that when the S&P
closes at its lowest level in at least two months and there's a noticeable
surge in volume, it rarely marks the ultimate bottom...

S&P Closes at Two-Month Low, NYSE Volume Over Upper Band
10/10/08... ???
06/27/08... Lower S&P close three sessions later
06/20/08... Lower S&P close two sessions later
11/08/07... Lower S&P close one session later
07/26/07... Lower S&P close one session later
02/27/07... Lower S&P close three sessions later
05/17/06... Lower S&P close one session later
04/15/05... Lower S&P close three sessions later
07/21/04... Lower S&P close two sessions later
03/11/04... Lower S&P close two sessions later
07/19/02... Lower S&P close one session later
06/26/02... Lower S&P close three sessions later
06/07/02... Lower S&P close two sessions later
06/06/02... Lower S&P close one session later
01/29/02... Lower S&P Close four sessions later
09/19/01... Lower S&P close one session later
09/17/01... Lower S&P close one session later
09/07/01... Lower S&P close two sessions later
09/06/01... Lower S&P close one session later
03/22/01... No lower close within five sessions
03/16/01... Lower S&P close two sessions later
02/22/01... Lower S&P close one session later
11/30/00... No lower close within five sessions
10/11/00... Lower S&P close one session later
08/27/98... Lower S&P close one session later
08/04/98... Lower S&P close five sessions later
07/16/96... Lower S&P close five sessions later
11/23/94... Lower S&P close five sessions later
10/05/92... Lower S&P close one session later
06/17/92... Lower S&P close one session later
04/08/92... No lower close within five sessions

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

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