Standard & Poors Oscillator Triggers Another Signal, Short-term Clues from the High/Low Data

Runaway market conditions still in effect, suggesting pullbacks will be shallow. The SPX has once again closed higher one week after a high 7+ reading from the Standard & Poors Oscillator. This triggers another two-week buy setup similar to the one triggered March 26th (see my 3/20 column). We remain technically overbought, but this action does suggest a short-term pullback will most likely resemble previous pullbacks over the past month in that it probably won’t last more than 2-3 days.

S&P Oscillator Over 7.0, SPX Higher One Week Later
04/13/09? S&P ??? two weeks later
03/26/09? S&P +2.8% two weeks later
06/08/04? S&P +0.5% two weeks later
01/07/04? S&P +0.9% two weeks later
06/10/03? S&P +0.6% two weeks later
03/15/02? S&P -2.3% two weeks later
10/30/98? S&P +3.8% two weeks later
05/16/97? S&P +1.3% two weeks later
01/08/92? S&P +1.6% two weeks later
02/06/91? S&P +2.2% two weeks later
01/20/87? S&P +3.0% two weeks later
02/28/86? S&P +4.9% two weeks later
01/28/85? S&P -0.1% two weeks later
08/13/84? S&P +0.6% two weeks later
10/19/82? S&P +0.8% two weeks later
08/30/82? S&P +3.3% two weeks later
08/11/78? S&P +0.5% two weeks later
05/02/78? S&P +1.7% two weeks later
11/23/77? S&P -4.3% two weeks later
01/13/76? S&P +4.9% two weeks later
02/04/75? S&P +4.0% two weeks later
01/14/75? S&P +7.1% two weeks later
10/02/73? S&P +1.1% two weeks later
12/15/71? S&P +2.9% two weeks later
12/10/70? S&P +0.9% two weeks later
09/03/70? S&P -0.9% two weeks later
04/17/68? S&P +0.6% two weeks later
01/20/67? S&P +1.2% two weeks later

Monday’s modestly positive breadth kept the NYSE McClellan Oscillator in overbought territory a second day, triggering a short-term sell signal that will remain in effect until the McClellan drops back into average territory. This setup was recently discussed in my April 2nd commentary.

The SPX posted a rally day Monday with higher highs, higher lows and a higher close, yet new 52-week highs contracted and new 52-week lows expanded. That’s only the 22nd time we’ve seen this occur since 1990, and it’s usually meant the market is on shaky ground short-term. I’d add, however, that this setup’s overall accuracy doesn’t quite hold up prior to 1990…

New Highs Contract, New Lows Expand on SPX Rally Day
04/13/09… ???
11/04/08… Lower S&P close one session later
05/15/08… Lower S&P close three sessions later
04/17/07… Lower S&P close two sessions later
08/03/05… Lower S&P close one session later
02/08/05… Lower S&P close one session later
12/23/04… Lower S&P close one session later
07/30/02… Lower S&P close two sessions later
03/08/02… Lower S&P close three sessions later
07/17/00… Lower S&P close one session later
03/02/00… Lower S&P close three sessions later
08/24/99… Lower S&P close two sessions later
07/13/98… No lower close within three sessions
07/15/97… Lower S&P close three sessions later
06/10/97… No lower close within three sessions
04/16/97… Lower S&P close one session later
12/26/95… Lower S&P close two sessions later
10/19/95… Lower S&P close one session later
07/14/92… Lower S&P close one session later
11/13/91… Lower S&P close one session later
01/18/91… Lower S&P close one session later
03/19/90… Lower S&P close one session later

Another interesting fact is that new 52-week lows expanded on both exchanges despite the S&P500 and Nasdaq100 hitting fresh one-month highs. The last thirty times this pattern has occurred are listed in the table below, along with the S&P’s performance three days later. Note that in only four cases out of the last thirty, or 13% of the time did the S&P500 gain more than 0.5% three days later. That’s significantly worse than the S&P’s at-any-time odds of 39% for a gain of more than 0.5% over any three-day period, suggesting limited upside potential heading into the end of the week…

SPX & NDX Both Hit a One-Month High,
New 52-week Lows Expand on Both Exchanges
04/13/09… S&P500 ??? three sessions later
08/08/08… S&P500 -0.8% three sessions later
05/15/08… S&P500 -0.7% three sessions later
04/02/08… S&P500 +0.4% three sessions later
12/11/07… S&P500 -0.7% three sessions later
10/11/07… S&P500 -1.0% three sessions later
10/09/07… S&P500 -0.2% three sessions later
07/16/07… S&P500 +0.2% three sessions later
07/12/07… S&P500 +0.1% three sessions later
06/01/07… S&P500 -1.2% three sessions later
05/23/07… S&P500 -0.3% three sessions later
05/04/07… S&P500 +0.5% three sessions later
04/17/07… S&P500 +0.9% three sessions later (*)
04/05/07… S&P500 -0.3% three sessions later
04/07/06… S&P500 -0.6% three sessions later
03/21/06… S&P500 +0.4% three sessions later
01/09/06… S&P500 -0.3% three sessions later
11/10/05… S&P500 -0.2% three sessions later
11/12/04… S&P500 -0.2% three sessions later
10/06/04… S&P500 -1.6% three sessions later
09/10/04… S&P500 -0.3% three sessions later
04/05/04… S&P500 -1.0% three sessions later
01/20/04… S&P500 +0.2% three sessions later
10/09/03… S&P500 +1.0% three sessions later (*)
08/22/03… S&P500 +0.4% three sessions later
03/17/03… S&P500 +1.5% three sessions later (*)
12/02/02… S&P500 -3.0% three sessions later
03/08/02… S&P500 -0.9% three sessions later
11/26/01… S&P500 -1.5% three sessions later
10/17/01… S&P500 +1.2% three sessions later (*)
05/22/01… S&P500 -2.4% three sessions later

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

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