Weekly S&P Chart Likely to Trigger a Signal at Friday’s Close

Stepping back to gain some perspective, one thing really stands out on the weekly chart of the S&P500. Note that after six consecutive weeks of higher highs and higher lows, the S&P is in the process of putting in its first week with a lower high and low. It will be cemented on Friday as long as SPX 875 holds on the upside. But rather than signaling a real change in trend, the first distribution week after such a long string of up weeks has traditionally been a reliable time to buy, not sell. The table below lists each of the last thirty instances stretching back fifty years in which the S&P posted a lower weekly high and low after five weeks of higher highs & lows…

Lower Weekly High & Low After Five Weeks of Higher Highs & Lows
11/03/06… S&P500 +1.2% one week later
06/24/05… S&P500 +0.2% one week later
11/01/96… S&P500 +3.9% one week later
12/22/95… S&P500 +0.7% one week later
06/24/94… S&P500 +0.8% one week later
01/24/92… S&P500 -1.6% one week later
03/01/91… S&P500 +1.2% one week later
12/22/89… S&P500 +1.7% one week later
08/18/89… S&P500 +1.3% one week later
09/04/87… S&P500 +1.7% one week later
07/02/87… S&P500 +0.9% one week later
03/07/86… S&P500 +4.9% one week later
12/27/85… S&P500 +0.6% one week later
02/22/85… S&P500 +2.2% one week later
12/28/79… S&P500 -1.2% one week later
09/07/79… S&P500 +1.0% one week later
05/26/78… S&P500 +1.6% one week later
12/22/72… S&P500 +1.9% one week later
01/28/72… S&P500 +0.7% one week later
02/26/71… S&P500 +2.3% one week later
11/01/68… S&P500 +0.9% one week later
08/18/67… S&P500 -2.2% one week later
11/25/66… S&P500 -0.9% one week later
05/21/65… S&P500 -0.4% one week later
10/16/64… S&P500 +0.4% one week later
03/26/64… S&P500 +1.0% one week later
02/08/63… S&P500 +0.4% one week later
02/10/61… S&P500 +1.0% one week later
06/27/58… S&P500 +1.3% one week later
02/14/58… S&P500 -1.1% one week later

Note that in 24 out of 30 cases, or 80% of the time, the S&P posted a higher weekly close the following week, significantly better than the 56% at-any-time odds for a higher weekly close one week later. Even when wrong, losses were typically limited to 1.5%, reaffirming the notion that after such a long string of up weeks, buyers stand ready to pounce on the first down week. Barring a break of SPX 875, this setup will go into effect at Friday’s close and would point to a close above Friday’s settlement on May 1st.

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

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