SPY Volume Surges to a One-Month High

Traders sold into Wednesday’s gap up opening, but a flurry of late-day buying left major averages near unchanged levels and our gauge of institutional buy/sell interest (TICKscore) at a neutral -1. The short-term bearish setup related to the back-to-back NASDAQ/NYSE Volume Ratios over 1.75 on June 4th and 5th is off the board as of Wednesday’s close. NASDAQ participants continues to dominate trade, with the ND/NY Volume Ratio closing at 1.92, the fifth consecutive day over 1.75. Overall volume picked up a bit from Tuesday on the NYSE and NASDAQ, but there was a big uptick in volume for SPY as just under 300 million shares traded hands. That’s a 30% increase from Tuesday and the heaviest one-day volume in over a month. I thought it would be interesting to look back at times when the SPY gapped up (above the previous day’s high) and closed lower on the heaviest volume in a month. It’s only happened ten times since the SPY began trading. Contrary to what you might think, the SPY has had a noticeable tendency to trade in the direction of the gap (up) over the next few sessions…

SPY Gaps Up, Closes Down on Heaviest Volume in a Month
06/10/09… SPY ??? three sessions later
03/14/08… SPY +0.6% three sessions later
04/01/05… SPY +1.0% three sessions later
06/06/03… SPY +1.1% three sessions later
09/25/00… SPY +0.5% three sessions later
10/16/97… SPY +2.4% three sessions later
07/09/97… SPY +1.1% three sessions later
11/26/96… SPY +0.2% three sessions later
12/20/95… SPY +1.4% three sessions later
06/28/94… SPY -0.1% three sessions later
05/21/93… SPY +1.9% three sessions later

To increase the sample size a bit, I tweaked the above criteria a bit by only looking for a close below the open rather than an actual ‘down close’. This increased the sample size to 17 occurrences since 1993. Again, there’s a notable tendency for the SPY to trade higher over the next three days…

SPY Gaps Up, Closes Below Open on Heaviest Volume in a Month
06/10/09… SPY ??? three sessions later
09/08/08… SPY -1.2% three sessions later
03/14/08… SPY +0.6% three sessions later
04/01/05… SPY +1.0% three sessions later
11/03/04… SPY +1.9% three sessions later
06/06/03… SPY +1.1% three sessions later
09/25/00… SPY +0.5% three sessions later
10/19/99… SPY +2.4% three sessions later
10/16/97… SPY +2.4% three sessions later
07/09/97… SPY +1.1% three sessions later
01/28/97… SPY +2.2% three sessions later
11/26/96… SPY +0.2% three sessions later
11/15/96… SPY +0.9% three sessions later
12/20/95… SPY +1.4% three sessions later
10/13/94… SPY +0.0% three sessions later
06/28/94… SPY -0.1% three sessions later
11/26/93… SPY -0.2% three sessions later
05/21/93… SPY +1.9% three sessions later

Note that only one case out of 17 led to any significant weakness over the next three sessions. While it’s not a statistically significant sample, this does tend to reinforce the one-week buy setup discussed in Tuesday evening’s column.

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

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