Stock Market Closes Out August on a Weak Note

S&P futures gapped lower Monday but closed near session highs as institutions refrained from active selling. TICKscore closed at a neutral -1, Cumulative TICK -1,900. Breadth was 2:1 negative on both exchanges.

As noted in today’s intraday update, the 10-day moving average of the CBOE equity put/call ratio closed lower for the second consecutive session as the market traded lower. This is contrary to the tendency for higher equity put volume during periods of weakness in stocks and is usually a bullish sign short-term.

The Nasdaq100 posted a NR10 day Monday, meaning it was the narrowest range day of the past ten sessions. It’s generally a short-term positive sign when a lopsided negative breadth session is accompanied by a tight range. There have only been a dozen cases since 1990, all but one of which led to a higher Nasdaq three sessions later…

Nasdaq NR10 Day & 2:1 Negative Breadth
08/31/09… Nasdaq ??? three sessions later
03/27/09… Nasdaq +0.1% three sessions later
10/27/08… Nasdaq +14.0% three sessions later
05/23/08… Nasdaq +3.1% three sessions later
08/11/06… Nasdaq +5.6% three sessions later
07/21/06… Nasdaq +2.5% three sessions later
10/18/05… Nasdaq +1.7% three sessions later
05/10/04… Nasdaq +1.4% three sessions later
04/06/04… Nasdaq +0.2% three sessions later
12/13/02… Nasdaq +0.8% three sessions later
09/05/02… Nasdaq +7.3% three sessions later
08/03/98… Nasdaq -0.2% three sessions later
01/21/92… Nasdaq +5.3% three sessions later

Another supportive factor for stocks is that the S&P closed out the month of August with consecutive down days. When the S&P500 closes lower on the final two trading days of a month, the market has a better-than-average chance of trading higher during the first 2-3 days of the next month. The table below lists each of the last thirty instances in which the S&P closed lower the last two sessions of the month. Note that in 25 out of 30 occurrences, or 83% of the time, the S&P posted a subsequently higher close (above the setup day’s close) 2-3 trading days later, significantly greater than the 63% at-any-time odds for a higher S&P close 2-3 sessions later…

S&P500 Closes Down Last Two Days of Month
08/31/09… S&P500 ???
02/27/09… S&P500 -3.0% three sessions later
01/30/09… S&P500 +1.5% two sessions later
04/30/08… S&P500 +2.0% two sessions later
02/29/08… S&P500 +0.2% three sessions later
06/29/07… S&P500 +1.4% two sessions later
04/30/07… S&P500 +0.9% two sessions later
12/29/06… S&P500 +0.0% two sessions later
08/31/06… S&P500 +0.7% two sessions later
03/31/06… S&P500 +0.9% two sessions later
12/30/05… S&P500 +2.0% two sessions later
06/30/05… S&P500 +1.2% two sessions later
11/30/04… S&P500 +1.4% two sessions later
04/30/04… S&P500 +1.1% two sessions later
06/30/03… S&P500 +2.0% two sessions later
03/31/03… S&P500 +3.9% two sessions later
09/30/02… S&P500 +1.6% two sessions later
08/30/02… S&P500 -4.0% three sessions later
10/31/01… S&P500 +2.6% two sessions later
02/28/01… S&P500 +0.1% three sessions later
11/30/99… S&P500 +1.5% two sessions later
08/31/99… S&P500 +2.8% three sessions later
07/30/99… S&P500 -1.8% three sessions later
04/30/99… S&P500 +0.9% three sessions later
03/31/99… S&P500 +2.7% two sessions later
02/26/99… S&P500 -0.9% three sessions later
12/31/98… S&P500 +1.3% two sessions later
08/31/98… S&P500 +3.4% two sessions later
08/29/97… S&P500 +3.2% two sessions later
03/31/97… S&P500 -0.9% three sessions later
02/28/97… S&P500 +0.0% two sessions later

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

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