NYSE TICK Hits a Two-Month High

The S&P500 closed at a fresh six-month high on Friday, indicating we’re likely to see range-bound trade on Monday. Each of the last thirty separate instances in which the S&P500 initially closed at a six-month high (meaning it did not close at a six-month high the previous session) are listed in the table below, along with the performance of the S&P the next day. Note the definitive tendency for the market to settle near unchanged levels. Not once out of the last thirty cases did the S&P gain 0.5% or more the next day, and in only four cases did it lose 0.5% or more…

S&P500 Closes at a Six-Month High
08/21/09… S&P ??? next session
08/13/09… S&P -0.9% next session
08/07/09… S&P -0.3% next session
07/30/09… S&P +0.1% next session
07/23/09… S&P +0.3% next session
07/20/09… S&P +0.4% next session
06/11/09… S&P +0.1% next session
06/01/09… S&P +0.2% next session
10/09/07… S&P -0.2% next session
10/05/07… S&P -0.3% next session
07/19/07… S&P -1.2% next session
07/12/07… S&P +0.3% next session
05/30/07… S&P +0.0% next session
05/18/07… S&P +0.2% next session
05/16/07… S&P -0.1% next session
05/09/07… S&P -1.4% next session
05/02/07… S&P +0.4%  next session
04/25/07… S&P -0.1% next session
04/20/07… S&P -0.2% next session
04/16/07… S&P +0.2% next session
02/20/07… S&P -0.1% next session
02/14/07… S&P +0.1% next session
02/07/07… S&P -0.1% next session
02/01/07… S&P +0.2% next session
01/24/07… S&P -1.1% next session
01/12/07… S&P +0.1% next session
12/14/06… S&P +0.1% next session
12/04/06… S&P +0.4%  next session
11/21/06… S&P +0.2% next session
11/14/06… S&P +0.2% next session
10/23/06… S&P +0.0% next session

As noted in Friday’s intraday update, big gains on options expiration often coincide with the end of a short-term rally phase. In 20 out of the last 30 cases in which the S&P gained 1%+ on expiration Friday, the market was trading lower one week later, significantly above the 44% at-any-time odds for a lower S&P five sessions later.

Interesting to note that the NYSE TICK posted an intraday high just below the +1,400 level on Friday, its highest intraday level in over two months. Looking back at previous instances in which the NYSE TICK initially recorded its highest reading in two months, there’s a definitive tendency for the market to trade lower short-term. The last thirty occurrences are listed in the table below along with the performance of the S&P500 over the next two sessions…

NYSE TICK Hits Two-Month High
08/21/09… S&P500 ??? two sessions later
05/18/09… S&P500 -0.7% two sessions later
02/24/09… S&P500 -2.6% two sessions later
10/17/08… S&P500 +1.5% two sessions later
09/18/08… S&P500 +0.1% two sessions later
09/05/08… S&P500 -1.4% two sessions later
07/08/08… S&P500 -1.6% two sessions later
03/26/08… S&P500 -1.9% two sessions later
01/23/08… S&P500 -0.6% two sessions later
06/27/07… S&P500 -0.2% two sessions later
06/12/07… S&P500 +2.0% two sessions later
06/08/07… S&P500 -1.0% two sessions later
03/21/07… S&P500 +0.1% two sessions later
03/12/07… S&P500 -1.4% two sessions later
12/20/06… S&P500 -0.9% two sessions later
11/30/06… S&P500 +0.6% two sessions later
08/29/06… S&P500 -0.0% two sessions later
05/19/06… S&P500 -0.8% two sessions later
01/03/06… S&P500 +0.4% two sessions later
04/12/05… S&P500 -2.2% two sessions later
04/07/05… S&P500 -0.8% two sessions later
07/12/04… S&P500 -0.3% two sessions later
05/14/04… S&P500 -0.4% two sessions later
05/12/04… S&P500 -0.2% two sessions later
03/05/04… S&P500 -1.4% two sessions later
02/02/04… S&P500 -0.8% two sessions later
08/26/03… S&P500 +0.6% two sessions later
07/01/03… S&P500 +0.4% two sessions later
04/30/03… S&P500 +1.4% two sessions later
04/28/03… S&P500 +0.2% two sessions later
02/21/03… S&P500 -1.1% two sessions later

Note that the S&P was twice as likely to trade lower over the next two sessions. In 20 out of the last 30 occurrences, or 67% of the time, the S&P closed lower two sessions after the NYSE TICK recorded a two-month high, significantly above the 47% at-any-time odds for a lower S&P two days later. In only five cases did the S&P gain more than 0.5% over the next two sessions, while it fell more than 0.5% fifteen times. In general, it appears that unusually high intraday TICK readings often means buying power is spent for the short-term.

From a longer-term perspective, Friday’s unfilled upside gap for S&P futures has bullish implications looking out towards mid-September. The reasoning is that Friday’s gap comes on the heels of a still-unfilled upside gap back on July 30th. When sellers can’t drive the market lower to fill a gap and then a second upside gap appears, it’s usually a sign that sellers are overwhelmed. While conditions can often turn choppy after the second gap, the market has a solid track record of rebounding from short-term weakness and settling flat-to-higher one month later. In the table below are each of the last thirty instances in which two unfilled upside gaps formed within a one-month time frame, along with the performance of the S&P500 looking out twenty trading days. Keep in mind that to qualify for inclusion, the first gap must remain unfilled when the second gap appears. Out of the last 30 occurrences, only three led to an S&P down 1%+ one month later, while nineteen led to an S&P up 1%+ one month later…

Two Unfilled Upside Gaps In a One-Month Time Frame
07/30/09 & 08/21/09… S&P500 ??? one month later
07/15/09 & 07/30/09… S&P500 +4.0% (open – ends 8/28)
04/02/09 & 04/09/09… S&P500 +8.5% one month later
11/24/08 & 12/08/08… S&P500 -0.3% one month later
04/16/08 & 04/18/08… S&P500 +2.5% one month later
03/18/08 & 03/24/08… S&P500 +2.8% one month later
12/21/07 & 12/24/07… S&P500 -10.2% one month later (*)
11/28/07 & 12/05/07… S&P500 -5.0% one month later (*)
04/16/07 & 04/20/07… S&P500 +2.3% one month later
04/03/07 & 04/16/07… S&P500 +2.3% one month later
06/15/06 & 06/29/06… S&P500 -0.1% one month later
10/31/05 & 11/17/05… S&P500 +1.7% one month later
05/18/05 & 05/26/05… S&P500 -0.6% one month later
10/01/04 & 10/04/04… S&P500 -0.4% one month later
11/24/03 & 12/01/03… S&P500 +3.8% one month later
03/13/03 & 04/02/03… S&P500 +4.3% one month later
10/15/02 & 10/17/02… S&P500 +2.7% one month later
10/11/02 & 10/15/02… S&P500 +0.2% one month later
11/13/01 & 12/05/01… S&P500 +0.5% one month later
11/05/01 & 11/13/01… S&P500 -0.3% one month later
09/24/01 & 09/28/01… S&P500 +5.6% one month later
04/10/01 & 04/18/01… S&P500 +3.4% one month later
10/28/99 & 10/29/99… S&P500 +2.5% one month later
03/25/99 & 03/29/99… S&P500 +4.6% one month later
03/05/99 & 03/25/99… S&P500 +4.7% one month later
11/23/98 & 11/27/98… S&P500 +2.3% one month later
10/30/98 & 11/23/98… S&P500 +0.8% one month later
01/13/98 & 02/02/98… S&P500 +5.1% one month later
11/17/97 & 11/20/97… S&P500 -1.7% one month later (*)
04/15/97 & 04/29/97… S&P500 +6.3% one month later
12/19/96 & 12/20/96… S&P500 +3.9% one month later

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

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