NYSE Cumulative TICK Hits a Two-Month High, Banks Continue to Underperform

Institutional buyers surfaced in a big way Monday, lifting major market
averages in excess of 10%. TICKscore settled at +79, Cumulative TICK +161,000.
That's the highest Cumulative TICK reading we've seen this year, a bullish
sign from an intermediate-term perspective. The table below lists the last
thirty instances in which the Cumulative TICK closed at its highest level of
the past two months...

NYSE Cumulative TICK Hits a Two-Month High
10/13/08... S&P500 ??? two weeks later
07/29/08... S&P500 +2.1% two weeks later
07/16/08... S&P500 +3.1% two weeks later
04/16/08... S&P500 +1.5% two weeks later
03/18/08... S&P500 +2.8% two weeks later
11/28/07... S&P500 +1.2% two weeks later
06/27/07... S&P500 +2.8% two weeks later
05/02/07... S&P500 +1.2% two weeks later
04/05/07... S&P500 +2.8% two weeks later
03/20/07... S&P500 +1.9% two weeks later
10/12/06... S&P500 +1.9% two weeks later
10/04/06... S&P500 +1.2% two weeks later
07/19/06... S&P500 +1.5% two weeks later
06/01/06... S&P500 -2.3% two weeks later
04/18/06... S&P500 +0.4% two weeks later
01/03/06... S&P500 +0.7% two weeks later
11/02/05... S&P500 +1.4% two weeks later
05/18/05... S&P500 +1.6% two weeks later
02/04/05... S&P500 -0.1% two weeks later
01/31/05... S&P500 +2.1% two weeks later
11/04/04... S&P500 +1.9% two weeks later
05/25/04... S&P500 +1.6% two weeks later
05/11/04... S&P500 +1.6% two weeks later
02/06/04... S&P500 -0.2% two weeks later
12/29/03... S&P500 +1.1% two weeks later
10/01/03... S&P500 +2.8% two weeks later
08/28/03... S&P500 +1.6% two weeks later
07/02/03... S&P500 -1.2% two weeks later
04/22/03... S&P500 +2.5% two weeks later
04/17/03... S&P500 +4.1% two weeks later
04/14/03... S&P500 +3.7% two weeks later

Note that in 26 out of 30 cases, or 87% of the time, the S&P was trading
higher two weeks later, significantly better than the 54% at-any-time odds for
a higher S&P two weeks (ten trading days) later. In general, very positive
NYSE TICK action typically leads to further price strength over the
intermediate-term.

The potential for higher prices over the next two weeks would be reinforced if
the S&P is trading above today's settlement at Thursday's close. As I noted in
my October 1st column, a day after our last 3:1+ positive breadth session,
"we'll want to see if the S&P can hold above Tuesday's settlement of 1166 at
this Friday's close. Historically, when the S&P can remain on firm ground in
the three days following a 3:1+ positive breadth day, there's further upside
in store over the next couple of weeks. This hasn't happened in some time,
with the last occurrence in early August." Of course that signal wasn't
triggered as the S&P traded straight down following the September 30th 4:1
positive breadth session.

Should the market build on today's gains heading into the end of October, it
will be interesting to see how the S&P reacts should it test the 1075 area.
Recall that this level relates to the upper end of the S&P's long-term
trendline channel seen on this logarithmic chart. Last week we saw the S&P
move convincingly back into that channel, suggesting the upper trendline
should now turn into long-term resistance.

On a short-term basis, all of the bullish setups on the board were fulfilled
with today's rally, and one sell signal was triggered. It's related to the
S&P's noticeable outperformance compared with the BKX. Looking back at times
when the S&P closed up 1% or more and doubled the performance of the BKX, it
typically reversed course and closed at a lower level within the next couple
of days. The last thirty occurrences are listed in the table below. Note that
in 25 cases, or 83% of the time, the S&P closed below the setup day's
settlement within two sessions. That's much higher than the S&P's 62% at-any-
time odds, indicating significant underperformance by the bank sector on a
solid up day has short- term bearish implications...

SPX Up 1%+, Doubles Performance of BKX
10/13/08... ??? 06/13/08... Lower SPX close two sessions later
03/24/08... Lower SPX close two sessions later
02/13/08... Lower SPX close one session later
01/14/08... Lower SPX close one session later
10/31/07... Lower SPX close one session later
08/24/07... Lower SPX close one session later
08/22/07... Lower SPX close one session later
03/06/07... Lower SPX close one session later
05/25/06... Lower SPX close two sessions later
04/21/05... Lower SPX close one session later
11/12/03... Lower SPX close one session later
05/09/03... No lower close within two sessions
04/10/02... Lower SPX close one session later
10/03/01... Lower SPX close one session later
08/24/01... Lower SPX close one session later
07/25/01... No lower close within two sessions
06/05/01... Lower SPX close one session later
05/21/01... Lower SPX close one session later
04/25/01... No lower close within two sessions
04/19/01... Lower SPX close one session later
04/17/01... No lower close within two sessions
01/18/01... Lower SPX close one session later
12/27/00... Lower SPX close two sessions later
11/14/00... Lower SPX close two sessions later
08/07/00... Lower SPX close two sessions later
06/13/00... No lower close within two sessions
05/05/00... Lower SPX close one session later
04/07/00... Lower SPX close one session later
03/09/00... Lower SPX close one session later
02/03/00... Lower SPX close one session later

I'd also note that Nasdaq breadth closed better than 5:1 positive Monday. Over
the last decade, there have been 21 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 Tuesday...

Nasdaq Breadth 3:1 Positive
10/13/08... NDX ??? next day
09/19/08... NDX -4.5% 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

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

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