Advance/Decline Ratio Remains in Positive Territory a Fifth Consecutive Session

Yesterday I noted that the New High-Low Index would trigger an intermediate-term sell signal at today’s close, and that in only one case out of the last 30 was the S&P up more than 2.5% two weeks later. This suggest today’s intraday high near SPX 775 is likely to remain an area of technical resistance until the end of March.

Breadth closed in positive territory for a fifth consecutive session Monday. In recent years, five straight days of positive breadth has been a sign that buying power is petering out. In 28 out of the last 30 separate occurrences, or 93% of the time, the S&P posted a lower close 3-6 trading days later, well ahead of the 66% at-any-time odds. Monday’s lower close fulfilled short-term bearish setups on the board from Friday, suggesting anything’s possible near-term. But the likelihood of a close below SPX 753 in the March 19th-24th time frame tells us bounces are unlikely to have much lasting power…

Breadth Positive Five in a Row
03/16/09… ???
01/06/09… Lower S&P close three sessions later
11/28/08… Lower S&P close three sessions later
11/03/08… Lower S&P close three sessions later
07/22/08… Lower S&P close three sessions later
05/16/08… Lower S&P close three sessions later
04/04/08… Lower S&P close three sessions later
08/23/07… Lower S&P close three sessions later
07/03/07… Lower S&P close four sessions later
06/01/07… Lower S&P close three sessions later
05/07/07… Lower S&P close three sessions later
04/04/07… Lower S&P close four sessions later
03/23/07… Lower S&P close three sessions later
02/01/07… Lower S&P close six sessions later
01/12/07… Lower S&P close three sessions later
11/16/06… Lower S&P close six sessions later
08/30/06… Lower S&P close four sessions later
08/18/06… Lower S&P close three sessions later
03/16/06… Lower S&P close three sessions later
01/09/06… Lower S&P close three sessions later
12/14/05… Lower S&P close three sessions later
11/23/05… Lower S&P close three sessions later
06/15/05… Lower S&P close six sessions later
06/02/05… Lower S&P close three sessions later
02/16/05… Lower S&P close three sessions later
12/14/04… Lower S&P close three sessions later
11/15/04… Lower S&P close three sessions later
10/29/04… No lower S&P close in 3-6 sessions
10/04/04… Lower S&P close three sessions later
08/02/04… Lower S&P close three sessions later
05/24/04… No lower S&P close in 3-6 sessions

Monday’s positive breadth also kept the NYSE McClellan Oscillator over +150 for the second day in a row. That triggers a sell signal that remains in effect until the McClellan falls back to more average territory. The table below lists every instance since 1995 in which the McClellan closed over +150 two consecutive sessions, along with the S&P?s performance by the time the McClellan fell back under +100. Note that in 26 out of 30 cases, or 87% of the time, the S&P was at a lower level when the McClellan fell back under +100?

McClellan Over +150 Two Days Running
03/16/09? S&P500 ??? when McClellan <100
12/31/08? S&P500 -3.7% when McClellan <100
12/17/08? S&P500 -4.6% when McClellan <100
12/03/08? S&P500 -0.2% when McClellan <100
11/28/08? S&P500 -8.9% when McClellan <100
10/31/08? S&P500 -6.6% when McClellan <100
08/06/08? S&P500 -1.8% when McClellan <100
07/23/08? S&P500 -2.3% when McClellan <100
04/02/08? S&P500 -1.0% when McClellan <100
02/01/08? S&P500 -4.2% when McClellan <100
12/07/07? S&P500 -1.8% when McClellan <100
10/02/07? S&P500 -0.5% when McClellan <100
09/19/07? S&P500 -0.7% when McClellan <100
09/04/07? S&P500 -2.4% when McClellan <100
03/22/07? S&P500 -0.4% when McClellan <100
08/17/06? S&P500 +0.0% when McClellan <100
07/03/06? S&P500 -1.7% when McClellan <100
01/09/06? S&P500 -0.3% when McClellan <100
11/25/05? S&P500 -0.9% when McClellan <100
06/02/05? S&P500 -0.8% when McClellan <100
05/19/05? S&P500 -0.1% when McClellan <100
05/25/04? S&P500 +1.6% when McClellan <100(*)
09/03/03? S&P500 -0.3% when McClellan <100
04/23/03? S&P500 -2.2% when McClellan <100
11/04/02? S&P500 -1.5% when McClellan <100
08/16/02? S&P500 -1.2% when McClellan <100
12/29/00? S&P500 -1.9% when McClellan <100
01/10/00? S&P500 -1.3% when McClellan <100
11/01/99? S&P500 +1.4% when McClellan <100(*)
04/22/99? S&P500 -1.7% when McClellan <100
10/19/98? S&P500 +6.2% when McClellan <100(*)

Similar to the New High-Low Index study, I’d note that in only one case out of thirty was the S&P up more than 2% by the time this signal was closed out. This points to the SPX 770 area as an area of short-term resistance until the market works off overbought conditions.

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

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