S&P Futures Quickly Fill Wednesday’s Upside Gap
By
Rennie on Thursday, January 29th, 2009 at 10:42 pm
The Equal Weight S&P500, which assigns a fixed 0.2% weighting to each of the 500 stocks in the index (as opposed to the standard capitalization weighted SPX), underperformed significantly Thursday by nearly a full 1%. That’s a negative indication for the next couple of sessions – see my January 12th column for a recent discussion.
TICKscore settled at -31 Thursday, Cumulative TICK at -64,000. Note that the overall trend of the Cumulative TICK 20-day moving average remains down. Over the next two days, the big 100,000+ readings from 12/31 and 1/2 will fall off the board, suggesting the downward trend will remain in effect until early next week.
With S&P futures filling Wednesday’s upside gap in such short order, I thought it would be interesting to look back at previous instances in which an upside gap on the daily S&P futures chart was filled the very next session. The last thirty occurrences are listed in the table below, and it’s noteworthy that the S&P had a definitive tendency to post a subsequently lower close within the next four sessions. That occurred in 26 out of 30 cases stretching back to 1996, or 87% of the time. While that just misses the threshold required to put it up on the board, given the S&P’s 70% at-any-time odds of posting a lower close within four sessions, it does tend to suggest that we’ll see a bit of follow-through from today’s selloff…
S&P Futures Fill an Upside Gap Very Next Session
01/29/09… ???
11/05/08… Lower S&P close one session later
09/22/08… Lower S&P close one session later
09/09/08… Lower S&P close four sessions later
08/29/08… Lower S&P close one session later
08/25/08… No lower close within four sessions
09/20/07… Lower S&P close two sessions later
07/05/07… Lower S&P close three sessions later
08/03/06… Lower S&P close one session later
06/20/05… Lower S&P close three sessions later
10/05/04… Lower S&P close two sessions later
03/18/04… Lower S&P close one session later
07/15/03… Lower S&P close one session later
10/18/02… Lower S&P close four sessions later
10/12/01… Lower S&P close one session later
04/06/01… No lower close within four sessions
11/28/00… Lower S&P close one session later
03/06/00… Lower S&P close one session later
02/09/00… Lower S&P close two sessions later
01/18/00… Lower S&P close two sessions later
01/11/00… Lower S&P close one session later
10/25/99… Lower S&P close one session later
09/28/99… Lower S&P close one session later
11/30/98… Lower S&P close three sessions later
10/13/98… No lower close within four sessions
09/24/98… Lower S&P close one session later
08/13/98… Lower S&P close one session later
07/17/97… Lower S&P close one session later
07/07/97… Lower S&P close two sessions later
12/23/96… No lower close within four sessions
06/25/96… Lower S&P close one session later
An encouraging sign from a longer-term perspective is that principal program trading activity remained heavy last week, with 42% of total program volume executed for member firms’ own accounts. That’s the third consecutive week of 40%+ readings during down weeks for the market, historically a bullish sign looking out six months. See my January 25th column for a recent discussion. While the vast majority of our longer-term indicators remain bearish, the elevated program trading is noteworthy, and I wouldn’t dismiss the potential for a counter-trend rebound heading into the middle of the year.
One indicator that’s going to have to show signs of real improvement before that can happen is the New High-Low Index, which is a 10-day moving average of New 52-week highs divided by the sum of New Highs + New Lows. The indicator continues to drag along below the 10% level, which is very low from a historical perspective (see long-term chart). Typically, the market has a tough time staging a sustainable rally without the participation of this indicator. For instance, any 5%+ rally in the S&P over a two-week period that’s accompanied by a New High-Low Index less than 80% has been a fairly reliable sell signal – see my January 6th column for the track record. On Tuesday of next week, the S&P will be up over 5% compared to its two-week ago close if it just holds at current levels. So from the perspective of this indicator, it would be healthier to see a pullback into early next week followed by a very gradual, choppy move higher that ultimately sees New 52-week Highs overtake New Lows in a meaningful way.
S&P Futures Quickly Fill Wednesday’s Upside Gap
By Rennie on Thursday, January 29th, 2009 at 10:42 pmThe Equal Weight S&P500, which assigns a fixed 0.2% weighting to each of the 500 stocks in the index (as opposed to the standard capitalization weighted SPX), underperformed significantly Thursday by nearly a full 1%. That’s a negative indication for the next couple of sessions – see my January 12th column for a recent discussion.
TICKscore settled at -31 Thursday, Cumulative TICK at -64,000. Note that the overall trend of the Cumulative TICK 20-day moving average remains down. Over the next two days, the big 100,000+ readings from 12/31 and 1/2 will fall off the board, suggesting the downward trend will remain in effect until early next week.
With S&P futures filling Wednesday’s upside gap in such short order, I thought it would be interesting to look back at previous instances in which an upside gap on the daily S&P futures chart was filled the very next session. The last thirty occurrences are listed in the table below, and it’s noteworthy that the S&P had a definitive tendency to post a subsequently lower close within the next four sessions. That occurred in 26 out of 30 cases stretching back to 1996, or 87% of the time. While that just misses the threshold required to put it up on the board, given the S&P’s 70% at-any-time odds of posting a lower close within four sessions, it does tend to suggest that we’ll see a bit of follow-through from today’s selloff…
S&P Futures Fill an Upside Gap Very Next Session
01/29/09… ???
11/05/08… Lower S&P close one session later
09/22/08… Lower S&P close one session later
09/09/08… Lower S&P close four sessions later
08/29/08… Lower S&P close one session later
08/25/08… No lower close within four sessions
09/20/07… Lower S&P close two sessions later
07/05/07… Lower S&P close three sessions later
08/03/06… Lower S&P close one session later
06/20/05… Lower S&P close three sessions later
10/05/04… Lower S&P close two sessions later
03/18/04… Lower S&P close one session later
07/15/03… Lower S&P close one session later
10/18/02… Lower S&P close four sessions later
10/12/01… Lower S&P close one session later
04/06/01… No lower close within four sessions
11/28/00… Lower S&P close one session later
03/06/00… Lower S&P close one session later
02/09/00… Lower S&P close two sessions later
01/18/00… Lower S&P close two sessions later
01/11/00… Lower S&P close one session later
10/25/99… Lower S&P close one session later
09/28/99… Lower S&P close one session later
11/30/98… Lower S&P close three sessions later
10/13/98… No lower close within four sessions
09/24/98… Lower S&P close one session later
08/13/98… Lower S&P close one session later
07/17/97… Lower S&P close one session later
07/07/97… Lower S&P close two sessions later
12/23/96… No lower close within four sessions
06/25/96… Lower S&P close one session later
An encouraging sign from a longer-term perspective is that principal program trading activity remained heavy last week, with 42% of total program volume executed for member firms’ own accounts. That’s the third consecutive week of 40%+ readings during down weeks for the market, historically a bullish sign looking out six months. See my January 25th column for a recent discussion. While the vast majority of our longer-term indicators remain bearish, the elevated program trading is noteworthy, and I wouldn’t dismiss the potential for a counter-trend rebound heading into the middle of the year.
One indicator that’s going to have to show signs of real improvement before that can happen is the New High-Low Index, which is a 10-day moving average of New 52-week highs divided by the sum of New Highs + New Lows. The indicator continues to drag along below the 10% level, which is very low from a historical perspective (see long-term chart). Typically, the market has a tough time staging a sustainable rally without the participation of this indicator. For instance, any 5%+ rally in the S&P over a two-week period that’s accompanied by a New High-Low Index less than 80% has been a fairly reliable sell signal – see my January 6th column for the track record. On Tuesday of next week, the S&P will be up over 5% compared to its two-week ago close if it just holds at current levels. So from the perspective of this indicator, it would be healthier to see a pullback into early next week followed by a very gradual, choppy move higher that ultimately sees New 52-week Highs overtake New Lows in a meaningful way.