A Momentum Indicator to Watch
By
Rennie on Thursday, August 6th, 2009 at 2:19 am
The number of stocks (across all exchanges) closing above/below their respective 20-day bollinger bands is a useful momentum gauge. Before a significant move starts, you’ll typically see an initial spike on this chart (updated daily in the charting section). The last spike occurred on July 15th when over 900 individual issues closed over their upper band. Since then, the spread has remained consistently positive.
Institutions remained better buyers Wednesday. TICKscore settled at +7, Cumulative TICK settled at +32,000. NYSE volume hit its highest level in over a month thanks to a 2 billion share day in Citigroup. While the S&P traded down 1% from Tuesday’s close, it finished down less than half that amount given the absence of real sellers.
In Wednesday’s Twitter updates I noted that on recent instances when the BKX gained 1.5%+ and the S&P finished lower, the market tended to stage a big move over the next two sessions. Here’s an expanded version of that table showing the last thirty occurrences…
BKX +1.5% or more, SPX Closes Lower
08/05/09 S&P ??? two sessions later
03/09/09 S&P +6.6% two sessions later
02/25/09 S&P -3.9% two sessions later
10/14/08 S&P -5.2% two sessions later
10/10/08 S&P +11.0% two sessions later
10/01/08 S&P -5.3% two sessions later
09/02/08 S&P -3.2% two sessions later
08/01/08 S&P +1.9% two sessions later
06/24/08 S&P -2.4% two sessions later
01/22/08 S&P +3.2% two sessions later
01/16/08 S&P -3.5% two sessions later
03/07/07 S&P +0.8% two sessions later
05/02/02 S&P -2.9% two sessions later
05/22/01 S&P -1.2% two sessions later
10/02/00 S&P -0.1% two sessions later
09/25/00 S&P -0.9% two sessions later
09/08/00 S&P -0.8% two sessions later
08/22/00 S&P +0.7% two sessions later
05/22/00 S&P -0.1% two sessions later
05/08/00 S&P -2.9% two sessions later
04/12/00 S&P -7.5% two sessions later
04/10/00 S&P -2.5% two sessions later
01/26/00 S&P -3.1% two sessions later
01/12/00 S&P +2.3% two sessions later
09/24/99 S&P +0.4% two sessions later
03/01/99 S&P -0.7% two sessions later
01/07/99 S&P -0.5% two sessions later
09/02/98 S&P -1.7% two sessions later
04/13/98 S&P +0.9% two sessions later
04/06/98 S&P -1.8% two sessions later
06/03/97 S&P -0.2% two sessions later
Out of the 23 occurrences since 2000, 15 (65%) led to an S&P +/- 2% two sessions later. By comparison, the random chance of an absolute move of 2%+ on two-day period since 2000 is only 20%. When the Bank Index and the S&P have diverged in such a significant manner, there’s been a better-than-average chance of a large move.
A Momentum Indicator to Watch
By Rennie on Thursday, August 6th, 2009 at 2:19 amThe number of stocks (across all exchanges) closing above/below their respective 20-day bollinger bands is a useful momentum gauge. Before a significant move starts, you’ll typically see an initial spike on this chart (updated daily in the charting section). The last spike occurred on July 15th when over 900 individual issues closed over their upper band. Since then, the spread has remained consistently positive.
Institutions remained better buyers Wednesday. TICKscore settled at +7, Cumulative TICK settled at +32,000. NYSE volume hit its highest level in over a month thanks to a 2 billion share day in Citigroup. While the S&P traded down 1% from Tuesday’s close, it finished down less than half that amount given the absence of real sellers.
In Wednesday’s Twitter updates I noted that on recent instances when the BKX gained 1.5%+ and the S&P finished lower, the market tended to stage a big move over the next two sessions. Here’s an expanded version of that table showing the last thirty occurrences…
BKX +1.5% or more, SPX Closes Lower
08/05/09 S&P ??? two sessions later
03/09/09 S&P +6.6% two sessions later
02/25/09 S&P -3.9% two sessions later
10/14/08 S&P -5.2% two sessions later
10/10/08 S&P +11.0% two sessions later
10/01/08 S&P -5.3% two sessions later
09/02/08 S&P -3.2% two sessions later
08/01/08 S&P +1.9% two sessions later
06/24/08 S&P -2.4% two sessions later
01/22/08 S&P +3.2% two sessions later
01/16/08 S&P -3.5% two sessions later
03/07/07 S&P +0.8% two sessions later
05/02/02 S&P -2.9% two sessions later
05/22/01 S&P -1.2% two sessions later
10/02/00 S&P -0.1% two sessions later
09/25/00 S&P -0.9% two sessions later
09/08/00 S&P -0.8% two sessions later
08/22/00 S&P +0.7% two sessions later
05/22/00 S&P -0.1% two sessions later
05/08/00 S&P -2.9% two sessions later
04/12/00 S&P -7.5% two sessions later
04/10/00 S&P -2.5% two sessions later
01/26/00 S&P -3.1% two sessions later
01/12/00 S&P +2.3% two sessions later
09/24/99 S&P +0.4% two sessions later
03/01/99 S&P -0.7% two sessions later
01/07/99 S&P -0.5% two sessions later
09/02/98 S&P -1.7% two sessions later
04/13/98 S&P +0.9% two sessions later
04/06/98 S&P -1.8% two sessions later
06/03/97 S&P -0.2% two sessions later
Out of the 23 occurrences since 2000, 15 (65%) led to an S&P +/- 2% two sessions later. By comparison, the random chance of an absolute move of 2%+ on two-day period since 2000 is only 20%. When the Bank Index and the S&P have diverged in such a significant manner, there’s been a better-than-average chance of a large move.