S&P500 Closes Higher in the Face of a 5% Decline for General Electric

Shares of General Electric closed down over 5% Tuesday, yet the S&P500 still managed to close higher. GE isn’t quite the bellwether it once was – it’s currently ranked third in the S&P behind XOM & PG and shares a similar market cap as T and JNJ – but it’s nonetheless noteworthy when the S&P and GE diverge in such a noticeable manner. Tuesday marked only the tenth time in the last thirty years that the S&P has managed to close higher on a 3%+ down day for General Electric. In the previous nine cases, the S&P struggled over the next few sessions…

GE Down 3%+, S&P Closes Higher
01/13/09… S&P500 ??? three sessions later
09/18/08… S&P500 -7.6% three sessions later
09/13/02… S&P500 -2.3% three sessions later
03/21/02… S&P500 -1.3% three sessions later
10/20/00… S&P500 -2.3% three sessions later
06/21/00… S&P500 -1.6% three sessions later
02/17/00… S&P500 -2.0% three sessions later
12/15/99… S&P500 +0.4% three sessions later
10/24/90… S&P500 -3.4% three sessions later
10/22/90… S&P500 -1.5% three sessions later

While the S&P managed a slight gain Tuesday, the Dow Industrials fell for a fifth consecutive session. That puts us on watch for another lower Dow close on Wednesday. If it manifests, odds would tilt in favor of another lower close by Monday of next week. Historically, when the Dow has posted three straight lower closes during options expiration week, there’s a notable tendency for the downtrend to continue over the next 1-3 days. The last thirty times that the Dow closed lower three days in a row (all during options expiration week) are listed in the table below. Note that in 27 out of 30 cases, or 90% of the time, there was a subsequently lower Dow close within the next three sessions, significantly better than the 67% at-any-time odds for a lower Dow close within three days. The implication is that when the market gets into a trending mode during expiration week, there’s a better than average chance of that trend continuing over the near-term.

Dow Down Three in a Row During Expiration Week
12/19/08… Lower Dow close one session later
06/18/08… Lower Dow close two sessions later
01/17/08… Lower Dow close one session later
10/17/07… Lower Dow close one session later
08/15/07… Lower Dow close one session later
01/19/07… Lower Dow close one session later
05/18/06… Lower Dow close two sessions later
04/15/05… Lower Dow close one session later
03/17/05… Lower Dow close two sessions later
01/21/05… Lower Dow close one session later
10/14/04… No lower close within three sessions
07/16/04… Lower Dow close one session later
02/20/04… Lower Dow close one session later
10/17/03… Lower Dow close three sessions later
07/17/03… No lower close within three sessions
01/17/03… Lower Dow close one session later
12/19/02… No lower close within three sessions
09/19/02… Lower Dow close two sessions later
06/21/02… Lower Dow close two sessions later
09/19/01… Lower Dow close one session later
08/15/01… Lower Dow close two sessions later
06/15/01… Lower Dow close two sessions later
09/15/00… Lower Dow close one session later
07/19/00… Lower Dow close three sessions later
02/18/00… Lower Dow close three sessions later
01/20/00… Lower Dow close one session later
10/13/99… Lower Dow close two sessions later
09/16/99… Lower Dow close three sessions later
01/13/99… Lower Dow close one session later
08/21/98… Lower Dow close three sessions later

Also notable that the VIX:VXV Ratio is nearing ‘market sell’ territory (<.90) even as the stock market struggles to stay afloat. This tends to indicate upside potential is likely to be limited over the coming month, and that if a rally does occur, it’s likely to be a choppy move higher rather than a strong trending move.

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

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