Multiple Setups Triggered Across All Time Frames

Short-term
Thursday’s lopsided positive breadth kept the NYSE McClellan Oscillator over +150 for a 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 the last thirty instances 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. While the last signal resulted in a sizable loss, it’s still been highly accurate over the last thirty signals. Note that in 26 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
04/02/09? S&P500 ??? when McClellan <100
03/16/09? S&P500 +4.5% 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

Volume associated with advancing issues accounted for over 90% of total volume Thursday, the fifth 90% up volume session of the past month. These lopsided volume sessions usually lead to ‘higher highs’ the next day (see my March 10th commentary), but should that occur Friday the volatility setup outlined below tells us it will most likely represent an intraday selling opportunity.

The OEX Volatility Index (VXO) closed higher Thursday despite big gains for the S&P, noteworthy given that advancers outpaced decliners by over a 6:1 margin. When volatility increases in the face of a lopsided positive breadth session, the market typically struggles to post more than modest gains the following session. Out of the last 30 occurrences, only two led to an S&P up more than 0.5% the next day?

Breadth 2:1 Positive, VXO Up
04/02/09? S&P ??? next day
02/06/09? S&P +0.2% next day
11/28/08? S&P -8.9% next day
10/16/08? S&P -0.6% next day
01/29/08? S&P -0.5% next day
08/08/07? S&P -3.0% next day
04/25/07? S&P -0.1% next day
10/16/06? S&P -0.4% next day
10/05/06? S&P -0.3% next day
06/30/06? S&P +0.8% next day (*)
01/04/06? S&P +0.0% next day
07/28/05? S&P -0.8% next day
06/16/05? S&P +0.5% next day
05/27/05? S&P -0.6% next day
12/28/04? S&P -0.0% next day
12/13/04? S&P +0.4% next day
11/12/04? S&P -0.0% next day
11/04/04? S&P +0.4% next day
03/05/04? S&P -0.8% next day
12/18/03? S&P -0.1% next day
10/27/03? S&P +1.5% next day (*)
10/13/03? S&P +0.4% next day
09/08/03? S&P -0.8% next day
09/02/03? S&P +0.4% next day
07/07/03? S&P +0.3% next day
06/04/03? S&P +0.4% next day
05/27/03? S&P +0.2% next day
05/06/03? S&P -0.5% next day
03/17/03? S&P +0.4% next day
11/27/02? S&P -0.3% next day
11/06/02? S&P -2.3% next day

Intermediate-term
With today’s rally, the S&P is once again up over 5% compared to its two-week ago close and the New High-Low Index remains well south of the 80% level. This triggers another two-week sell setup, the seventh such signal in just the last six months. Historically, a 5%+ up move without a correspondingly high Index reading has typically led to a challenging time for stocks over the next two weeks. The table below lists each of the last thirty separate instances in which the S&P500 was up 5% from its ten-day ago close and the New High-Low Index was under 80%, along with the performance of the S&P500 two weeks later. Note the general theme of limited upside potential. In 21 out of 30 cases, or 70% of the time, the S&P was trading at a lower level two weeks later, significantly greater than the 47% at-any-time odds of a lower S&P two weeks later?

S&P500 +5% Over Two Weeks, New High-Low Index <80%
04/02/09? S&P500 ??? two weeks later
03/16/09? S&P500 +4.5% two weeks later
01/06/09? S&P500 -10.1% two weeks later
12/15/08? S&P500 +2.5% two weeks later
12/05/08? S&P500 +1.4% two weeks later
11/07/08? S&P500 -14.1% two weeks later
11/04/08? S&P500 -14.6% two weeks later
08/11/08? S&P500 -3.0% two weeks later
04/28/08? S&P500 +0.5% two weeks later
04/03/08? S&P500 -0.3% two weeks later
04/01/08? S&P500 -2.6% two weeks later
12/10/07? S&P500 -1.3% two weeks later
12/06/07? S&P500 -3.1% two weeks later
03/18/03? S&P500 -0.9% two weeks later
01/06/03? S&P500 -4.5% two weeks later
11/27/02? S&P500 -4.0% two weeks later
11/25/02? S&P500 -3.1% two weeks later
10/28/02? S&P500 -1.6% two weeks later
08/27/02? S&P500 -2.7% two weeks later
08/15/02? S&P500 -1.3% two weeks later
11/13/01? S&P500 -0.9% two weeks later
10/10/01? S&P500 +0.4% two weeks later
10/04/01? S&P500 -0.1% two weeks later
04/18/01? S&P500 +2.3% two weeks later
10/31/00? S&P500 -3.3% two weeks later
06/09/00? S&P500 -1.1% two weeks later
06/07/00? S&P500 +0.5% two weeks later
05/01/00? S&P500 -1.1% two weeks later
03/21/00? S&P500 +0.1% two weeks later
03/16/00? S&P500 +2.0% two weeks later
11/16/99? S&P500 -1.5% two weeks later

Long-term
The 20-day moving average of NYSE Down Volume fell below the 40% level Thursday. That?s a positive sign from a longer-term perspective, as it reflects a real absence of selling pressure over the past month. When selling pressure has been this light in the past, stocks have typically (with the exception of the last signal) remained on firm footing over the next two months. The table below lists each of the last thirty instances in which the 20-day moving average of NYSE Down Volume fell below 40% for the first time in at least a month?

20day Average of Down Volume <40% First Time in a Month
04/02/09? S&P500 ??? two months later
12/19/08? S&P500 -12.3% two months later
04/16/07? S&P500 +1.7% two months later
11/25/05? S&P500 -0.1% two months later
11/17/04? S&P500 +0.2% two months later
09/07/04? S&P500 +0.8% two months later
01/06/04? S&P500 +2.8% two months later
09/02/03? S&P500 +2.4% two months later
05/09/03? S&P500 +8.0% two months later
11/06/02? S&P500 +0.6% two months later
11/02/98? S&P500 +10.8% two months later
02/09/98? S&P500 +9.8% two months later
05/05/97? S&P500 +7.3% two months later
03/11/97? S&P500 +0.5% two months later
01/10/97? S&P500 +7.1% two months later
11/18/96? S&P500 +4.4% two months later
08/12/96? S&P500 +5.2% two months later
05/09/96? S&P500 +1.1% two months later
02/01/96? S&P500 +1.1% two months later
11/24/95? S&P500 +2.1% two months later
01/09/95? S&P500 +4.6% two months later
07/25/94? S&P500 +2.0% two months later
05/19/94? S&P500 -0.3% two months later
12/27/93? S&P500 +0.2% two months later
10/14/93? S&P500 -0.6% two months later
08/17/93? S&P500 +1.8% two months later
05/20/93? S&P500 -1.0% two months later
03/16/93? S&P500 -1.5% two months later
10/30/92? S&P500 +4.6% two months later
09/22/92? S&P500 +0.5% two months later
07/16/92? S&P500 +0.5% two months later

Note that in 24 out of the last 30 occurrences, or 80% of the time, the S&P was trading at a higher level two months later. That?s significantly greater than the 61% at-any-time odds. Also noteworthy is that the S&P was down more than 1.5% two months later only once out of the last thirty signals.

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

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