Approaching the Presidents Day Holiday, S&P Posts a Recovery Day

Stock indexes rebounded from a steep intraday selloff to finish slightly higher on the session. As I’ve discussed a number of times in the past, these ‘recovery days’ do not generally see follow-through over the near-term. In fact odds favor a resumption of the downtrend over the next 1-2 days. The table below lists every instance since 1990 in which the S&P500 recovered from a 1.5% intraday deficit to close with a modest gain (<1%)…

S&P Down 1.5%+ Intraday, Closes Up Less Than 1%
01/23/09? No lower close within two sessions
01/15/09? Lower SPX close two sessions later
12/12/08? Lower SPX close one session later
11/25/08? No lower close within two sessions
11/18/08? Lower SPX close one session later
09/26/08? Lower SPX close one session later
09/05/08? Lower SPX close two sessions later
07/01/08? Lower SPX close one session later
03/13/08? Lower SPX close one session later
08/16/07? No lower close within two sessions
08/10/07? Lower SPX close one session later
06/08/06? Lower SPX close one session later
05/12/04? Lower SPX close one session later
03/20/03? Lower SPX close two sessions later
02/25/03? Lower SPX close one session later
10/23/02? Lower SPX close one session later
08/09/02? Lower SPX close one session later
07/30/02? Lower SPX close two sessions later
07/11/02? Lower SPX close one session later
06/24/02? Lower SPX close one session later
10/05/01? Lower SPX close one session later
03/01/01? Lower SPX close one session later
04/27/00? Lower SPX close one session later
01/05/00? No lower close within two sessions
05/12/99? Lower SPX close two sessions later
09/21/98? No lower close within two sessions
06/07/96? Lower SPX close one session later
03/31/94? Lower SPX close one session later

Note that in 23 out of 28 occurrences, or 82% of the time, the S&P posted a subsequently lower close within the next two sessions, significantly greater than the 60% at-any-time odds of a lower close within two days.

Even with the late-day surge, the Bank Index (BKX) settled down nearly 3% at 27.57. The underperformance of the BKX relative to the SPX triggers a three-day sell setup, given that the S&P typically struggles over the next few sessions when it bucks the trend of a solid down day for the BKX. The table below lists the last thirty instances in which the S&P500 closed higher on a day when the Philadelphia Bank Index lost more than 1.5%?

S&P Closes Higher Despite 1.5%+ Selloff for BKX
02/12/09? S&P500 ??? three sessions later
02/03/09? S&P500 +3.6% three sessions later
01/26/09? S&P500 +1.0% three sessions later
01/15/09? S&P500 -0.4% three sessions later
06/30/08? S&P500 -1.3% three sessions later
06/23/08? S&P500 -2.6% three sessions later
06/09/08? S&P500 -1.6% three sessions later
05/28/08? S&P500 -0.4% three sessions later
05/16/08? S&P500 -2.4% three sessions later
05/08/08? S&P500 +0.4% three sessions later
04/04/08? S&P500 -1.2% three sessions later
03/03/08? S&P500 -2.0% three sessions later
12/12/07? S&P500 -2.7% three sessions later
04/02/07? S&P500 +1.4% three sessions later
03/06/07? S&P500 +0.5% three sessions later
10/05/01? S&P500 +0.9% three sessions later
01/09/01? S&P500 +1.4% three sessions later
11/15/00? S&P500 -3.4% three sessions later
10/04/00? S&P500 -2.3% three sessions later
06/30/00? S&P500 +0.1% three sessions later
06/21/00? S&P500 -1.6% three sessions later
06/15/00? S&P500 -0.2% three sessions later
05/16/00? S&P500 -4.0% three sessions later
04/27/00? S&P500 -1.3% three sessions later
04/07/00? S&P500 -3.2% three sessions later
02/17/00? S&P500 -2.0% three sessions later
02/14/00? S&P500 -0.1% three sessions later
02/10/00? S&P500 -1.0% three sessions later
01/10/00? S&P500 -0.5% three sessions later
12/16/99? S&P500 +1.0% three sessions later
11/03/99? S&P500 +1.6% three sessions later

Note that in only ten cases out of thirty, or 33% of the time, was the S&P trading at a higher level three sessions later. That?s significantly worse than the 54% at-any-time odds for a higher S&P three sessions later.

TICKscore settled at -28 Thursday, indicating the NYSE TICK spent more time in extreme negative territory than it did in extreme positive territory. While the late-session rally lifted the market out of the red, this indicator suggests institutions were better sellers Thursday.

Meanwhile, the Nasdaq/NYSE Volume Ratio closed over 1.65 for the second day in a row, reflecting too much speculative interest and not enough institutional interest. That type of activity is not generally conducive to higher stock prices.

Finally, while I don’t give this a lot of weight, primarily because it’s a recent phenomenon, it’s noteworthy that the session before Presidents Day (which is Friday) has been an unusually weak session in recent years. Since 1990, the S&P has gained more than 0.1% on the day before Presidents Day only twice out of nineteen occurrences, noteworthy considering the generally positive implications for stocks prior to most holidays…

The Session before Presidents Day
02/13/09 S&P500 ???
02/15/08 S&P500 +0.1%
02/16/07 S&P500 -0.1%
02/17/06 S&P500 -0.2%
02/18/05 S&P500 +0.1%
02/13/04 S&P500 -0.5%
02/14/03 S&P500 +2.1%
02/15/02 S&P500 -1.1%
02/16/01 S&P500 -1.9%
02/18/00 S&P500 -3.0%
02/12/99 S&P500 -1.9%
02/13/98 S&P500 -0.4%
02/14/97 S&P500 -0.4%
02/16/96 S&P500 -0.5%
02/17/95 S&P500 -0.7%
02/18/94 S&P500 -0.6%
02/12/93 S&P500 -0.7%
02/14/92 S&P500 -0.3%
02/15/91 S&P500 +1.3%
02/16/90 S&P500 -0.7%

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

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