Contracting SPY Volume & Fifth Lower Close for S&P Futures are Short-term Positive Signs

S&P futures closed lower for a fifth consecutive session Tuesday, tilting the odds in favor of a close above today’s settlement by the end of the week. The last thirty times that the front-month contract initially closed down five days in a row are listed in the table below. Note that in 28 out of 30 cases, or 93% of the time, the S&Ps posted a higher close (above the setup day’s close) within the next two sessions. That’s significantly better than the 65% at-any-time odds for a higher close within two days…

S&P Futures Settle Lower Five Days in a Row
12/23/08… ???
10/08/08… Higher close three sessions later
01/22/08… Higher close one session later
02/27/07… Higher close one session later
06/09/06… Higher close four sessions later
01/05/05… Higher close one session later
02/24/04… Higher close one session later
01/22/03… Higher close one session later
12/05/02… Higher close one session later
04/05/02… Higher close one session later
02/07/02… Higher close one session later
09/21/01… Higher close one session later
06/14/01… Higher close one session later
11/13/00… Higher close one session later
10/12/00… Higher close one session later
05/23/00… Higher close one session later
04/14/00… Higher close one session later
09/24/99… Higher close one session later
07/23/99… Higher close two sessions later
04/19/99… Higher close one session later
07/24/98… Higher close one session later
02/29/96… Higher close one session later
02/20/96… Higher close one session later
09/07/94… Higher close one session later
05/09/94… Higher close one session later
04/18/94… Higher close one session later
07/06/93… Higher close one session later
06/08/93… Higher close one session later
04/23/93… Higher close two sessions later
10/07/92… Higher close one session later
03/30/92… Higher close one session later

SPY volume contracted for the third day in a row Tuesday, That’s only the eleventh time since the SPY began trading that we’ve seen three consecutive down days on successively lighter volume. While the sample size is small, it does suggest limited downside potential heading into next Monday’s session…

SPY Down Three on Successively Lighter Volume
12/23/08… SPY ??? three days later
08/04/08… SPY +1.6% three days later
07/28/08… SPY +2.6% three days later
09/24/07… SPY +0.9% three days later
11/11/02… SPY +2.8% three days later
06/26/01… SPY +0.9% three days later
11/20/00… SPY +0.1% three days later
06/18/96… SPY +0.7% three days later
03/21/96… SPY +0.6% three days later
10/07/93… SPY +0.5% three days later
07/19/93… SPY -0.5% three days later

Institutional participation has clearly dropped off significantly and will likely remain low through the New Years holiday. It’s for this reason that I traditionally take off the week between Christmas and New Years, and this year is no exception. After the last few months, I think a little downtime is just what the doctor ordered. I will return with a new column, hopefully on our new site, on January 4th. Datasheets & charts will continue to be updated intermittently throughout the holiday break. Best wishes for a happy and prosperous 2009!

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

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