New Highs Fail to Keep Up with Market

Noteworthy that NYSE volume came in below its 20-day moving average Wednesday. The last thirty times that NYSE volume came in below average on the day of a Fed meeting are listed in the table below. Note that in 25 out of 30 cases, the S&P reversed course over the next 1-2 days.

NYSE Volume Below 20day Avg on an FOMC Announcement Day
08/12/09… S&P Closes higher… ???
06/24/09… S&P Closes higher… No lower close next 1-2 days
04/29/09… S&P Closes higher… Lower Close Next Day
12/16/08… S&P Closes higher… Lower Close Next Day
10/29/08… S&P Closes lower… Higher Close Next Day
08/05/08… S&P Closes higher… Lower Close Two Days Later
01/30/08… S&P Closes lower… Higher Close Next Day
06/28/07… S&P Closes lower… Higher Close Two Days Later
05/09/07… S&P Closes higher… Lower Close Next Day
03/21/07… S&P Closes higher… Lower Close Next Day
08/08/06… S&P Closes lower… Higher close Two Days Later
05/10/06… S&P Closes lower… No higher close next 1-2 days
03/28/06… S&P Closes lower… Higher Close Next Day
11/01/05… S&P Closes lower… Higher Close Next Day
08/09/05… S&P Closes higher… Lower Close Next Day
02/02/05… S&P Closes higher… Lower Close Next Day
11/10/04… S&P Closes lower… Higher close Next Day
08/10/04… S&P Closes higher… Lower Close Next Day
08/12/03… S&P Closes higher… Lower Close Next Day
06/25/03… S&P Closes lower… Higher Close Next Day
12/10/02… S&P Closes higher… Lower Close Two Days Later
08/13/02… S&P Closes lower… Higher Close Next Day
03/19/02… S&P Closes higher… Lower Close Next Day
10/02/01… S&P Closes higher… No lower close next 1-2 days
08/21/01… S&P Closes lower… Higher Close Next Day
05/15/01… S&P Closes higher… No lower close next 1-2 days
01/31/01… S&P Closes lower… Higher Close Next Day
11/15/00… S&P Closes higher… Lower Close Next Day
08/22/00… S&P Closes lower… Higher Close Next Day
03/21/00… S&P Closes higher… No lower close next 1-2 days
02/02/00… S&P Closes lower… Higher Close Next Day

While that’s not significantly better than the 68% random chance for a reversal over the next 1-2 days, I think the chances are better than normal considering the drop in new 52-week highs.  When the S&P gains over 0.75% and makes higher highs and higher lows, as was the case Wednesday, you don’t typically see a drop in the number of new 52-week highs. It signals a relative absence of participation among market leaders (those at new highs), and usually means the rally is on shaky ground short-term. The last thirty times this pattern has occurred are listed in the table below, along with the S&P’s performance over the next three trading days. Note that in 23 out of the last 30 occurrences, or 77% of the time, the S&P500 was trading at a lower level three sessions later, significantly greater than the 45% at-any-time odds for a lower S&P three sessions later…

S&P +0.75% & Rally Day, New 52-week Highs Drop
08/12/09… S&P500 ???  three sessions later
06/29/09… S&P500 -3.3% three sessions later
05/08/09… S&P500 -4.9% three sessions later
05/06/09… S&P500 -1.1% three sessions later
03/04/09… S&P500 -5.1% three sessions later
02/03/09… S&P500 +3.6% three sessions later
01/28/09… S&P500 -5.6% three sessions later
01/02/09… S&P500 -2.7% three sessions later
11/28/08… S&P500 -2.9% three sessions later
11/24/08… S&P500 +5.2% three sessions later
11/04/08… S&P500 -7.4% three sessions later
10/31/08… S&P500 -1.7% three sessions later
10/13/08… S&P500 -5.7% three sessions later
07/16/08… S&P500 +1.2% three sessions later
07/08/08… S&P500 -2.7% three sessions later
05/15/08… S&P500 -0.7% three sessions later
05/12/08… S&P500 +1.4% three sessions later
03/18/08… S&P500 +1.4% three sessions later
02/13/08… S&P500 -1.4% three sessions later
01/24/08… S&P500 +0.8% three sessions later
01/10/08… S&P500 -2.8% three sessions later
11/23/07… S&P500 +2.0% three sessions later
07/28/06… S&P500 -0.0% three sessions later
07/03/06… S&P500 -1.2% three sessions later
02/08/06… S&P500 -0.2% three sessions later
09/02/04… S&P500 -0.2% three sessions later
04/05/04… S&P500 -1.0% three sessions later
05/06/03… S&P500 -0.1% three sessions later
04/23/03… S&P500 -0.5% three sessions later
03/19/03… S&P500 -1.1% three sessions later
09/25/02… S&P500 -2.9% three sessions later

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

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