S&P500 Surges Higher Amidst an Absence of Selling Pressure
By
Rennie on Friday, July 24th, 2009 at 1:49 am
Institutions were active buyers Thursday. TICKscore closed at +39, Cumulative TICK +117,300. The 200-day moving average of NYSE up volume – down volume pushed cleanly above the zero line for the first time since 2007, a bullish sign as long as it holds above zero.
A 2%+ up day for the S&P after multiple days of higher highs and higher lows doesn’t sound like a great time to buy. Prices are high, so it’s natural to wait for a pullback. The problem is that the pullback is often quicker and shallower than expected before the market takes off again. Here’s a look at all cases since 1965 in which the S&P gained 2%+ after three days of higher highs and higher lows. While there have only been ten cases, it’s noteworthy that the market moved higher over the next two weeks in all but one instance…
S&P500 2% Up Day After Three Days of Higher Highs & Lows
07/23/09… S&P500 ??? two weeks later
03/17/09… S&P500 +2.5% two weeks later
12/30/91… S&P500 +1.3% two weeks later
05/11/90… S&P500 +0.7% two weeks later
12/18/87… S&P500 +3.8% two weeks later
03/11/86… S&P500 +1.3% two weeks later
10/11/82… S&P500 -0.9% two weeks later
08/02/78… S&P500 +1.7% two weeks later
08/16/71… S&P500 +0.8% two weeks later
08/24/70… S&P500 +2.5% two weeks later
04/01/68… S&P500 +4.7% two weeks later
To increase the sample size a bit, I also looked at the results following three days of higher highs or higher lows (but not necessarily both). Interestingly, the market performed much better when the 2% up day followed three days of ‘higher lows’. It seems that the absence of sellers, as reflected by the three higher lows, is more significant than the presence of buyers (which could have interesting implications for other studies). There have been 26 occurrences of this pattern since 1965, all of which are listed below along with the S&P’s performance over the next two weeks…
S&P500 2% Up Day After Three Days of Higher Lows
07/23/09… S&P500 ??? two weeks later
03/17/09… S&P500 +2.5% two weeks later
03/12/09… S&P500 +10.9% two weeks later
12/05/08… S&P500 +1.4% two weeks later
11/04/08… S&P500 -14.6% two weeks later (*)
10/17/02… S&P500 +0.8% two weeks later
03/01/02… S&P500 +3.0% two weeks later
04/10/01… S&P500 +5.2% two weeks later
12/23/98… S&P500 +3.8% two weeks later
11/23/98… S&P500 -0.6% two weeks later
10/15/98… S&P500 +3.7% two weeks later
02/02/98… S&P500 +2.2% two weeks later
05/05/97… S&P500 +0.4% two weeks later
12/30/91… S&P500 +1.3% two weeks later
02/11/91… S&P500 -1.6% two weeks later
05/11/90… S&P500 +0.7% two weeks later
01/04/88… S&P500 -1.6% two weeks later
12/18/87… S&P500 +3.8% two weeks later
04/21/87… S&P500 +0.8% two weeks later
03/11/86… S&P500 +1.3% two weeks later
10/11/82… S&P500 -0.9% two weeks later
10/07/82… S&P500 +8.0% two weeks later
10/06/82… S&P500 +10.5% two weeks later
08/02/78… S&P500 +1.7% two weeks later
08/16/71… S&P500 +0.8% two weeks later
08/24/70… S&P500 +2.5% two weeks later
04/01/68… S&P500 +4.7% two weeks later
When a big rally has come after a series of higher lows, it has not been a good time to turn bearish. In 21 out of 26 occurrences, or 81% of the time, the S&P was higher two weeks later. That’s significantly above the 56% at-any-time odds for a higher S&P two weeks later. Equally noteworthy is that the S&P was down more than 2% two weeks later only once, while it was up more than 2% two weeks later twelve times. This suggests an area of intermediate-term support around SPX 960.
Another indicator is also pointing to that area as potentially longer-term support. Our version of Standard and Poors Oscillator closed at an extremely high 11.35 on Thursday, exceeding the March top which itself represented a 26-year high. Of the nine other instances in which the Oscillator crossed the 10.0 level, maximum drawdown (on a closing basis) was only 2.5% looking out as far as three months. Should that hold true this time around, SPX 950 should turn into long-term support that will hold into October.
S&P500 Surges Higher Amidst an Absence of Selling Pressure
By Rennie on Friday, July 24th, 2009 at 1:49 amInstitutions were active buyers Thursday. TICKscore closed at +39, Cumulative TICK +117,300. The 200-day moving average of NYSE up volume – down volume pushed cleanly above the zero line for the first time since 2007, a bullish sign as long as it holds above zero.
A 2%+ up day for the S&P after multiple days of higher highs and higher lows doesn’t sound like a great time to buy. Prices are high, so it’s natural to wait for a pullback. The problem is that the pullback is often quicker and shallower than expected before the market takes off again. Here’s a look at all cases since 1965 in which the S&P gained 2%+ after three days of higher highs and higher lows. While there have only been ten cases, it’s noteworthy that the market moved higher over the next two weeks in all but one instance…
S&P500 2% Up Day After Three Days of Higher Highs & Lows
07/23/09… S&P500 ??? two weeks later
03/17/09… S&P500 +2.5% two weeks later
12/30/91… S&P500 +1.3% two weeks later
05/11/90… S&P500 +0.7% two weeks later
12/18/87… S&P500 +3.8% two weeks later
03/11/86… S&P500 +1.3% two weeks later
10/11/82… S&P500 -0.9% two weeks later
08/02/78… S&P500 +1.7% two weeks later
08/16/71… S&P500 +0.8% two weeks later
08/24/70… S&P500 +2.5% two weeks later
04/01/68… S&P500 +4.7% two weeks later
To increase the sample size a bit, I also looked at the results following three days of higher highs or higher lows (but not necessarily both). Interestingly, the market performed much better when the 2% up day followed three days of ‘higher lows’. It seems that the absence of sellers, as reflected by the three higher lows, is more significant than the presence of buyers (which could have interesting implications for other studies). There have been 26 occurrences of this pattern since 1965, all of which are listed below along with the S&P’s performance over the next two weeks…
S&P500 2% Up Day After Three Days of Higher Lows
07/23/09… S&P500 ??? two weeks later
03/17/09… S&P500 +2.5% two weeks later
03/12/09… S&P500 +10.9% two weeks later
12/05/08… S&P500 +1.4% two weeks later
11/04/08… S&P500 -14.6% two weeks later (*)
10/17/02… S&P500 +0.8% two weeks later
03/01/02… S&P500 +3.0% two weeks later
04/10/01… S&P500 +5.2% two weeks later
12/23/98… S&P500 +3.8% two weeks later
11/23/98… S&P500 -0.6% two weeks later
10/15/98… S&P500 +3.7% two weeks later
02/02/98… S&P500 +2.2% two weeks later
05/05/97… S&P500 +0.4% two weeks later
12/30/91… S&P500 +1.3% two weeks later
02/11/91… S&P500 -1.6% two weeks later
05/11/90… S&P500 +0.7% two weeks later
01/04/88… S&P500 -1.6% two weeks later
12/18/87… S&P500 +3.8% two weeks later
04/21/87… S&P500 +0.8% two weeks later
03/11/86… S&P500 +1.3% two weeks later
10/11/82… S&P500 -0.9% two weeks later
10/07/82… S&P500 +8.0% two weeks later
10/06/82… S&P500 +10.5% two weeks later
08/02/78… S&P500 +1.7% two weeks later
08/16/71… S&P500 +0.8% two weeks later
08/24/70… S&P500 +2.5% two weeks later
04/01/68… S&P500 +4.7% two weeks later
When a big rally has come after a series of higher lows, it has not been a good time to turn bearish. In 21 out of 26 occurrences, or 81% of the time, the S&P was higher two weeks later. That’s significantly above the 56% at-any-time odds for a higher S&P two weeks later. Equally noteworthy is that the S&P was down more than 2% two weeks later only once, while it was up more than 2% two weeks later twelve times. This suggests an area of intermediate-term support around SPX 960.
Another indicator is also pointing to that area as potentially longer-term support. Our version of Standard and Poors Oscillator closed at an extremely high 11.35 on Thursday, exceeding the March top which itself represented a 26-year high. Of the nine other instances in which the Oscillator crossed the 10.0 level, maximum drawdown (on a closing basis) was only 2.5% looking out as far as three months. Should that hold true this time around, SPX 950 should turn into long-term support that will hold into October.