No Bounce for the Standard & Poors Oscillator

On Friday I noted that the NYSE TICK had hit its highest level in over five months, typically a sign that buying pressure is spent for the short-term. Adding to the short-term negative outlook, it’s noteworthy that despite very positive breadth statistics on Thursday and Friday, the Standard & Poors Oscillator declined both days. This is technically our version of S&P’s Oscillator, which is a very good estimation of the official number (we uncovered some old articles detailing the original calculation of the Oscillator.) It’s essentially a breadth-based indicator. Inputs are advancing issues, unchanged issues, total issues and the S&P, and it generally tracks the market fairly closely (see chart). This is why it caught my eye on Friday that the market rallied for a second consecutive session and yet the Oscillator remained in a short-term downtrend. Looking back at the last thirty instances in which the S&P rallied two days and the Oscillator declined both days, there has been a definitive tendency for the S&P to reverse course and trade lower over the next couple of days…

S&P500 Up Two, S&P Oscillator Down Two
09/04/09… S&P500 ??? two sessions later
08/27/09… S&P500 -1.0% two sessions later
06/12/09… S&P500 -3.6% two sessions later
04/24/09… S&P500 -1.3% two sessions later
04/01/09… S&P500 +3.9% two sessions later (*)
01/16/09… S&P500 -1.2% two sessions later
09/12/08… S&P500 -3.0% two sessions later
09/11/08… S&P500 -4.5% two sessions later
09/08/08… S&P500 -2.8% two sessions later
07/01/08… S&P500 -1.7% two sessions later
04/07/08… S&P500 -1.3% two sessions later
12/13/07… S&P500 -2.9% two sessions later
04/18/07… S&P500 +0.8% two sessions later
02/07/07… S&P500 -0.8% two sessions later
10/19/06… S&P500 +0.7% two sessions later
10/10/06… S&P500 +0.7% two sessions later
09/27/06… S&P500 -0.1% two sessions later
01/24/06… S&P500 +0.6% two sessions later
11/07/05… S&P500 -0.2% two sessions later
09/16/05… S&P500 -1.3% two sessions later
08/03/05… S&P500 -1.5% two sessions later
07/14/05… S&P500 -0.4% two sessions later
02/16/05… S&P500 -0.7% two sessions later
02/15/05… S&P500 -0.8% two sessions later
12/09/04… S&P500 +0.8% two sessions later
11/18/04… S&P500 -0.5% two sessions later
10/18/04… S&P500 -0.9% two sessions later
02/26/04… S&P500 +1.0% two sessions later
02/03/04… S&P500 -0.7% two sessions later
01/08/04… S&P500 -0.4% two sessions later
01/07/04… S&P500 -0.4% two sessions later

In 23 out of the last 30 occurrences, or 77% of the time, the S&P closed lower two sessions later, significantly above the 48% at-any-time odds for a lower S&P close two days later in the same time frame. The market was up more than 1% over next two days only once, while it lost more than 1% eleven times.

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

 Print This Post