S&P Futures Going for a Second Upside Gap
By
Rennie on Thursday, October 8th, 2009 at 2:47 am
Here’s something I missed on my intraday scan… S&P futures triggered a variation of the ‘Gap & Go’ price pattern discussed last month by closing higher on the session immediately following an unfilled upside gap. This price action indicates buyers aren’t backing down. The last thirty occurrences are listed below…
S&P Futures Close Higher After Unfilled Upside Gap
10/07/09… S&P futures ??? two sessions later
09/09/09… S&P futures +0.9% two sessions later
07/31/09… S&P futures +2.1% two sessions later
07/16/09… S&P futures +1.4% two sessions later
06/02/09… S&P futures -0.2% two sessions later
05/05/09… S&P futures +0.4% two sessions later
04/13/09… S&P futures -0.6% two sessions later
04/03/09… S&P futures -3.2% two sessions later
11/25/08… S&P futures +4.9% two sessions later
04/21/08… S&P futures -0.7% two sessions later
04/17/08… S&P futures +1.2% two sessions later
04/02/08… S&P futures +0.1% two sessions later
12/26/07… S&P futures -1.6% two sessions later
12/24/07… S&P futures -1.1% two sessions later
12/06/07… S&P futures +0.8% two sessions later
11/29/07… S&P futures +0.3% two sessions later
07/13/07… S&P futures -0.1% two sessions later
04/17/07… S&P futures +0.1% two sessions later
04/04/07… S&P futures +0.4% two sessions later
02/15/07… S&P futures +0.2% two sessions later
11/30/06… S&P futures +0.6% two sessions later
08/17/06… S&P futures +0.1% two sessions later
11/18/05… S&P futures +1.0% two sessions later
05/27/05… S&P futures +0.1% two sessions later
05/19/05… S&P futures +0.4% two sessions later
02/01/05… S&P futures +0.0% two sessions later
10/04/04… S&P futures +0.6% two sessions later
04/05/04… S&P futures -0.5% two sessions later
11/25/03… S&P futures +0.4% two sessions later
10/06/03… S&P futures +0.2% two sessions later
03/14/03… S&P futures +4.0% two sessions later
In 22 out of 30 occurrences, or 73% of the time, S&P futures settled higher two days later, significantly above the 53% random chance for a higher S&P two sessions later in the same time frame. Gains were not especially strong over the next two sessions, with only five cases leading to a move of more than 1%.
S&P futures are trading sharply higher in overnight trading (currently +10). This could set the stage for a second unfilled upside gap, which would have generally bullish indications through early November. 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 good 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.
Two Unfilled Upside Gaps In a One-Month Time Frame
07/30/09 & 08/21/09… S&P500 +3.8% one month later
07/15/09 & 07/30/09… S&P500 +4.5% one month later
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
Out of the last 30 occurrences, 22 led to a higher S&P one month later. That 73% win rate is not significantly better than the 58% at-any-time odds for a higher S&P one month later. However, the market’s limited downside potential is significant. In only 3 cases out of 30, or 10% of the time did the S&P fall 1%+ over the next month. In the same period of time, the random chance for a drop of 1%+ over any twenty-day period is 35%. For this setup to go into effect, December S&Ps need to hold above today’s high at 1054.50 throughout Thursday’s session.
Interesting to note the 20-day moving average of the Cumulative TICK is trending lower despite the market’s recent push higher. Big positive readings from early September are falling off the average, which will keep it trending sideways-to-down over the next week. That’s noteworthy considering the high correlation between the Cumulative TICK average and the S&P. Anything less than very strong Cumulative TICK readings over the coming days would suggest the S&P’s first attempt at breaking out could be thwarted.
Along those lines, I’d also keep close tabs on the number of new 20-day highs. Note from the current chart that 20-day highs are lagging well behind levels from a few weeks back despite the S&P trading at a similar level. On a break to new (closing) highs, we should see the number of new 20-day highs surge into the 2000+ range. Failure to come close would suggest the breakout attempt is not likely to succeed the first time around.
We’ll also want to keep an eye on new 52-week highs Wednesday. A reading over 400 would tend to affirm the longer-term bullish implications of the two unfilled gaps study (see Tuesday’s column).
S&P Futures Going for a Second Upside Gap
By Rennie on Thursday, October 8th, 2009 at 2:47 amHere’s something I missed on my intraday scan… S&P futures triggered a variation of the ‘Gap & Go’ price pattern discussed last month by closing higher on the session immediately following an unfilled upside gap. This price action indicates buyers aren’t backing down. The last thirty occurrences are listed below…
S&P Futures Close Higher After Unfilled Upside Gap
10/07/09… S&P futures ??? two sessions later
09/09/09… S&P futures +0.9% two sessions later
07/31/09… S&P futures +2.1% two sessions later
07/16/09… S&P futures +1.4% two sessions later
06/02/09… S&P futures -0.2% two sessions later
05/05/09… S&P futures +0.4% two sessions later
04/13/09… S&P futures -0.6% two sessions later
04/03/09… S&P futures -3.2% two sessions later
11/25/08… S&P futures +4.9% two sessions later
04/21/08… S&P futures -0.7% two sessions later
04/17/08… S&P futures +1.2% two sessions later
04/02/08… S&P futures +0.1% two sessions later
12/26/07… S&P futures -1.6% two sessions later
12/24/07… S&P futures -1.1% two sessions later
12/06/07… S&P futures +0.8% two sessions later
11/29/07… S&P futures +0.3% two sessions later
07/13/07… S&P futures -0.1% two sessions later
04/17/07… S&P futures +0.1% two sessions later
04/04/07… S&P futures +0.4% two sessions later
02/15/07… S&P futures +0.2% two sessions later
11/30/06… S&P futures +0.6% two sessions later
08/17/06… S&P futures +0.1% two sessions later
11/18/05… S&P futures +1.0% two sessions later
05/27/05… S&P futures +0.1% two sessions later
05/19/05… S&P futures +0.4% two sessions later
02/01/05… S&P futures +0.0% two sessions later
10/04/04… S&P futures +0.6% two sessions later
04/05/04… S&P futures -0.5% two sessions later
11/25/03… S&P futures +0.4% two sessions later
10/06/03… S&P futures +0.2% two sessions later
03/14/03… S&P futures +4.0% two sessions later
In 22 out of 30 occurrences, or 73% of the time, S&P futures settled higher two days later, significantly above the 53% random chance for a higher S&P two sessions later in the same time frame. Gains were not especially strong over the next two sessions, with only five cases leading to a move of more than 1%.
S&P futures are trading sharply higher in overnight trading (currently +10). This could set the stage for a second unfilled upside gap, which would have generally bullish indications through early November. 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 good 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.
Two Unfilled Upside Gaps In a One-Month Time Frame
07/30/09 & 08/21/09… S&P500 +3.8% one month later
07/15/09 & 07/30/09… S&P500 +4.5% one month later
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
Out of the last 30 occurrences, 22 led to a higher S&P one month later. That 73% win rate is not significantly better than the 58% at-any-time odds for a higher S&P one month later. However, the market’s limited downside potential is significant. In only 3 cases out of 30, or 10% of the time did the S&P fall 1%+ over the next month. In the same period of time, the random chance for a drop of 1%+ over any twenty-day period is 35%. For this setup to go into effect, December S&Ps need to hold above today’s high at 1054.50 throughout Thursday’s session.
Interesting to note the 20-day moving average of the Cumulative TICK is trending lower despite the market’s recent push higher. Big positive readings from early September are falling off the average, which will keep it trending sideways-to-down over the next week. That’s noteworthy considering the high correlation between the Cumulative TICK average and the S&P. Anything less than very strong Cumulative TICK readings over the coming days would suggest the S&P’s first attempt at breaking out could be thwarted.
Along those lines, I’d also keep close tabs on the number of new 20-day highs. Note from the current chart that 20-day highs are lagging well behind levels from a few weeks back despite the S&P trading at a similar level. On a break to new (closing) highs, we should see the number of new 20-day highs surge into the 2000+ range. Failure to come close would suggest the breakout attempt is not likely to succeed the first time around.
We’ll also want to keep an eye on new 52-week highs Wednesday. A reading over 400 would tend to affirm the longer-term bullish implications of the two unfilled gaps study (see Tuesday’s column).