Cluster of Historically Large Percentage Gains for the S&P500
By
Rennie on Thursday, March 12th, 2009 at 3:19 am
Stocks settled mixed Wednesday in thin trading. Institutional participation was light, with our TICKscore indicator closing at +8 and Cumulative TICK at +4,000. Volume associated with advancing issues accounted for 60% of total volume on the NYSE, sending the 20-day moving average of Up Volume above the 40% level. That closes out the ‘washout’ buy signal triggered March 9th, leaving little on the board.
As I noted in yesterday’s column, higher highs is very common after a 90%+ up volume session, and Wednesday was no exception. Key for Thursday is whether the S&P can keep that trend of higher highs intact by trading above Wednesday?s high at SPX 731.92. The table below lists all recent instances [since 1970] in which the S&P500 posted two consecutive higher highs immediately after a 90%+ up volume session. Note that in every case, the second higher high was a short-term buying opportunity, and the S&P settled above the first day?s high (which would be Wednesday?s high in this case) either the same day or the next in every case?
Buy the S&P on the Second Higher High after 90%+ Up Volume
Buy 01/02/09 @ 910.32? S&P close +2.4% same day
Buy 11/26/08 @ 868.94? S&P close +2.2% same day
Buy 11/30/07 @ 1473.81? S&P close +0.5% same day
Buy 08/31/07 @ 1468.43? S&P close +0.4% same day
Buy 08/21/07 @ 1451.75? S&P close +0.9% next day
Buy 03/08/07 @ 1401.16? S&P close +0.1% same day
Buy 07/03/06 @ 1276.30? S&P close +0.3% same day
Buy 04/20/06 @ 1310.39? S&P close +0.1% same day
Buy 03/19/03 @ 866.94? S&P close +0.8% same day
Buy 01/06/03 @ 911.25? S&P close +2.0% same day
Buy 07/31/02 @ 909.81? S&P close +0.2% same day
Buy 11/02/87 @ 254.04? S&P close +0.7% same day
Buy 01/07/87 @ 253.99? S&P close +0.5% same day
Buy 08/24/82 @ 116.09? S&P close +1.3% next day
Buy 05/29/70 @ 75.44? S&P close +1.5% same day
For this setup to go into effect Thursday, the S&P would need to trade above 731.92 on an intraday basis. Should that occur, odds would favor a close above that level on Thursday or Friday at the latest.
From an intermediate-term perspective, there’s not a lot to lean on at current levels. While it looks like we could go either way short-term, from an intermediate-term perspective I’d continue to question the sustainability of market rallies. For example, if the S&P is trading at current levels or higher at the end of next week, the New High-Low Index will trigger an intermediate-term sell. This is due to the fact that 5%+ rallies over a two-week period without a bullish New High-Low Index reading (80%+) typically lead to a downside reversal over the next two weeks (see my January 6th column for a recent track record).
From a longer-term perspective, it’s noteworthy that Tuesday represented the 43rd largest one-day percentage gain for the S&P500. I’ve taken all 48 instances in which the S&P gained 6% or more and sorted them by date in the table below. It begins with the date and the percentage gain for the S&P, and is followed by the number of 6%+ up days in the past six (calendar) months. Note that this figure just reached six as of Tuesday. There has only been one other period in history when this figure initially reached five – October 1931.
| Date |
SPX
%Chg |
# 6%+ Rallies |
| 1/8/1931 |
7.55% |
1 |
| 6/3/1931 |
7.54% |
2 |
| 6/20/1931 |
6.05% |
3 |
| 9/23/1931 |
6.67% |
3 |
| 10/6/1931 |
12.36% |
4 |
| 10/8/1931 |
8.59% |
5 |
| 12/18/1931 |
8.29% |
5 |
| 1/6/1932 |
7.02% |
5 |
| 2/11/1932 |
8.27% |
6 |
| 2/13/1932 |
8.37% |
7 |
| 5/6/1932 |
7.22% |
5 |
| 6/4/1932 |
6.75% |
6 |
| 6/10/1932 |
7.66% |
7 |
| 8/3/1932 |
8.86% |
6 |
| 8/6/1932 |
6.18% |
8 |
| 8/15/1932 |
7.20% |
5 |
| 9/21/1932 |
11.81% |
6 |
| 10/11/1932 |
7.17% |
7 |
| 10/14/1932 |
6.90% |
8 |
| 11/4/1932 |
6.17% |
9 |
| 11/10/1932 |
7.51% |
9 |
| 3/15/1933 |
16.61% |
6 |
| 4/19/1933 |
7.21% |
4 |
| 4/20/1933 |
9.52% |
5 |
| 4/29/1933 |
6.26% |
6 |
| 6/19/1933 |
7.23% |
5 |
| 7/24/1933 |
8.14% |
6 |
| 10/4/1933 |
6.41% |
6 |
| 2/16/1935 |
10.38% |
1 |
| 3/16/1935 |
9.96% |
2 |
| 4/17/1935 |
9.61% |
3 |
| 5/17/1935 |
9.40% |
4 |
| 8/17/1935 |
10.17% |
4 |
| 11/18/1935 |
11.50% |
2 |
| 10/20/1937 |
7.48% |
1 |
| 10/25/1937 |
6.38% |
2 |
| 1/6/1938 |
7.51% |
3 |
| 4/9/1938 |
6.76% |
4 |
| 9/12/1938 |
9.64% |
2 |
| 10/10/1938 |
7.00% |
2 |
| 9/5/1939 |
9.63% |
1 |
| 10/21/1987 |
9.10% |
1 |
| 10/13/2008 |
11.58% |
1 |
| 10/28/2008 |
10.79% |
2 |
| 11/13/2008 |
6.92% |
3 |
| 11/21/2008 |
6.32% |
4 |
| 11/24/2008 |
6.47% |
5 |
| 3/10/2009 |
6.37% |
6 |
In October ’31, the rolling count of 6%+ up days in the past six calendar months remained steadily over five (save for one day in 1933) until April ’34. The good news is that the stock market put in its ultimate long-term bottom during this time frame. The bad news is that conditions were gut-wrenchingly volatile, with the S&P plunging over 55% between October ’31 and June 1932, rallying 45% between June and September ’32 before plunging another 30% from September to December.
In the early 30′s, the appearance of five or more 6%+ rallies within a six-month time frame signaled danger first and foremost until conditions settled down. The fact that this just occurred again for the first time in 70+ years is not exactly a positive sign from a long-term perspective. A positive sign would be if the cycle is broken, and for this to occur we can’t see another 6%+ rally before the end of April mid-May.
Edit: Missing dates (6/20/31, 11/4/32, 8/6/32, 4/29/33 and 11/21/08) added to table. Numerous corrections to text beginning with “From a longer-term perspective…”
Cluster of Historically Large Percentage Gains for the S&P500
By Rennie on Thursday, March 12th, 2009 at 3:19 amStocks settled mixed Wednesday in thin trading. Institutional participation was light, with our TICKscore indicator closing at +8 and Cumulative TICK at +4,000. Volume associated with advancing issues accounted for 60% of total volume on the NYSE, sending the 20-day moving average of Up Volume above the 40% level. That closes out the ‘washout’ buy signal triggered March 9th, leaving little on the board.
As I noted in yesterday’s column, higher highs is very common after a 90%+ up volume session, and Wednesday was no exception. Key for Thursday is whether the S&P can keep that trend of higher highs intact by trading above Wednesday?s high at SPX 731.92. The table below lists all recent instances [since 1970] in which the S&P500 posted two consecutive higher highs immediately after a 90%+ up volume session. Note that in every case, the second higher high was a short-term buying opportunity, and the S&P settled above the first day?s high (which would be Wednesday?s high in this case) either the same day or the next in every case?
Buy the S&P on the Second Higher High after 90%+ Up Volume
Buy 01/02/09 @ 910.32? S&P close +2.4% same day
Buy 11/26/08 @ 868.94? S&P close +2.2% same day
Buy 11/30/07 @ 1473.81? S&P close +0.5% same day
Buy 08/31/07 @ 1468.43? S&P close +0.4% same day
Buy 08/21/07 @ 1451.75? S&P close +0.9% next day
Buy 03/08/07 @ 1401.16? S&P close +0.1% same day
Buy 07/03/06 @ 1276.30? S&P close +0.3% same day
Buy 04/20/06 @ 1310.39? S&P close +0.1% same day
Buy 03/19/03 @ 866.94? S&P close +0.8% same day
Buy 01/06/03 @ 911.25? S&P close +2.0% same day
Buy 07/31/02 @ 909.81? S&P close +0.2% same day
Buy 11/02/87 @ 254.04? S&P close +0.7% same day
Buy 01/07/87 @ 253.99? S&P close +0.5% same day
Buy 08/24/82 @ 116.09? S&P close +1.3% next day
Buy 05/29/70 @ 75.44? S&P close +1.5% same day
For this setup to go into effect Thursday, the S&P would need to trade above 731.92 on an intraday basis. Should that occur, odds would favor a close above that level on Thursday or Friday at the latest.
From an intermediate-term perspective, there’s not a lot to lean on at current levels. While it looks like we could go either way short-term, from an intermediate-term perspective I’d continue to question the sustainability of market rallies. For example, if the S&P is trading at current levels or higher at the end of next week, the New High-Low Index will trigger an intermediate-term sell. This is due to the fact that 5%+ rallies over a two-week period without a bullish New High-Low Index reading (80%+) typically lead to a downside reversal over the next two weeks (see my January 6th column for a recent track record).
From a longer-term perspective, it’s noteworthy that Tuesday represented the 43rd largest one-day percentage gain for the S&P500. I’ve taken all 48 instances in which the S&P gained 6% or more and sorted them by date in the table below. It begins with the date and the percentage gain for the S&P, and is followed by the number of 6%+ up days in the past six (calendar) months. Note that this figure just reached six as of Tuesday. There has only been one other period in history when this figure initially reached five – October 1931.
%Chg
In October ’31, the rolling count of 6%+ up days in the past six calendar months remained steadily over five (save for one day in 1933) until April ’34. The good news is that the stock market put in its ultimate long-term bottom during this time frame. The bad news is that conditions were gut-wrenchingly volatile, with the S&P plunging over 55% between October ’31 and June 1932, rallying 45% between June and September ’32 before plunging another 30% from September to December.
In the early 30′s, the appearance of five or more 6%+ rallies within a six-month time frame signaled danger first and foremost until conditions settled down. The fact that this just occurred again for the first time in 70+ years is not exactly a positive sign from a long-term perspective. A positive sign would be if the cycle is broken, and for this to occur we can’t see another 6%+ rally before the end of April mid-May.
Edit: Missing dates (6/20/31, 11/4/32, 8/6/32, 4/29/33 and 11/21/08) added to table. Numerous corrections to text beginning with “From a longer-term perspective…”