Russell Rebalancing Triggers a Surge in Volume

Volume spiked higher late Friday due to the Russell rebalancing. We already discussed the short-term negative implications of Friday’s narrow range (see intraday update), and the spike in volume doesn’t help the bullish case. Note from this chart that NYSE volume closed over its upper bollinger band – a true ‘spike’ in volume – and that it coincided with a higher high and higher low for the S&P. Historically, this combination has had negative implications looking out 2-3 trading days. The last thirty times we’ve seen NYSE volume close over its upper bollinger band on a day when the S&P posted a higher high and low are listed in the table below…

NYSE Volume Over Upper Band, SPX Higher High & Low
06/26/09… S&P500 ???
06/19/09… S&P500 -2.8% two sessions later
09/19/08… S&P500 -5.3% two  sessions later
09/08/08… S&P500 -2.8% two sessions later
03/11/08… S&P500 -0.4% two sessions later
12/21/07… S&P500 -0.5% three sessions later
09/21/07… S&P500 -0.6% two sessions later
09/19/07… S&P500 -0.2% two sessions later
09/18/07… S&P500 -0.1% two sessions later
06/15/07… S&P500 -1.3% three sessions later
05/31/07… S&P500 +0.0% three sessions later
04/20/07… S&P500 -0.3% two sessions later
09/15/06… S&P500 -0.1% two sessions later
09/12/06… S&P500 +0.5% three sessions later
04/18/06… S&P500 +0.3% three sessions later
09/16/05… S&P500 -1.3% two sessions later
08/31/05… S&P500 -0.2% two sessions later
06/17/05… S&P500 -0.3% two sessions later
10/01/04… S&P500 +0.9% three sessions later
09/30/04… S&P500 +1.8% three  sessions later
04/22/04… S&P500 -0.4% two sessions later
09/03/03… S&P500 -0.5% two sessions later
06/06/03… S&P500 -0.3% two sessions later
03/21/03… S&P500 -2.4% two sessions later
03/13/03… S&P500 +4.2% three sessions later
11/21/02… S&P500 -0.1% two sessions later
06/28/02… S&P500 -4.2% two sessions later
04/18/01… S&P500 -1.1% three sessions later
01/04/01… S&P500 -2.8% two sessions later
06/02/00… S&P500 -1.3% two sessions later
03/16/00… S&P500 -0.1% two sessions later

Note that in 24 out of the last 30 occurrences, or 80% of the time, the S&P posted a subsequently lower close (below the setup day’s close) 2-3 sessions later. That’s significantly above the 59% at-any-time odds for a lower S&P close 2-3 days later.

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

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