Last Hour Indicator Breaks Out Of Its Trading Range
By
Rennie on Wednesday, November 18th, 2009 at 12:09 am
SPY volume hit a fresh one-month low and NYSE volume nearly did the same as some traders got a jump on the upcoming holiday. Breadth settled well off session lows but still slightly negative on the session, keeping the Cumulative Breadth line from breaking out into new highs along with the S&P. TICKscore closed at +7, sending the cumulative TICKscore line up to, but not over its most recent high. It would be a positive sign to see these two indicators confirm the recent breakout. Cumulative TICK closed at +21,600. The 20-day moving average is still in the process of bottoming out, but negative readings from late October will begin falling off the average tomorrow and give it a natural boost.
S&P futures posted an inside day and an NR10 day, but more importantly managed to actually close higher on the session following Monday’s upside gap. That’s a sign buyers aren’t backing down. The last thirty occurrences of a higher close immediately following an unfilled upside gap for the front-month S&P contract are listed below…
S&P Futures Close Higher After Unfilled Upside Gap
11/17/09… S&P futures ??? two sessions later
11/10/09… S&P futures -0.4% two sessions later
10/15/09… S&P futures +0.1% two sessions later
10/09/09… S&P futures +0.1% two sessions later
10/07/09… S&P futures +1.4% 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
In 22 out of the last 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, however, with only five cases leading to a move of more than 1%.
After months in a trading range, the Last Hour indicator entered into a steep decline right around the time of the October peak and it hasn’t looked back. This is a ‘smart money’ indicator, and it implies a large amount of selling by this group has already taken place. Historically, steep declines tend to lead to lower lows on a longer-term basis, suggesting this could be just the beginning of a larger move. Pull up this chart for a good look at similarly precipitous declines in 2000, 2002, 2005 and 2007. The Last Hour is calculated by subtracting the stock market’s performance during the last hour of the session from the performance during the first hour. The formula is (today’s close – today’s 3pm price) – (today’s 10:30am price – yesterday’s close). A dropping Last Hour, like we’ve seen recently, indicates the last hour of the trading day is consistently underperforming the first hour. The idea behind the indicator is that dumb money gets pulled into the market during the first hour of the session while the smart money trades late in the day. So given recent action (higher prices, lower Last Hour indicator), we can surmise that investors are buying, but smart money is selling into strength. Nonetheless, we need to be careful about drawing bearish conclusions prematurely. Note from the long-term chart that the Last Hour indicator also fell sharply throughout the 2005-2007 stock market rally. While the indicator was ultimately proved correct in that it preceded the 2008 crash, it was two years before the trend of the Last Hour shifted out of a pattern of lower lows in late 2007. We’re currently finishing up the first month. This smart money indicator is warning that the rally will ultimately end badly, but it does not indicate ‘when’. Prices could move considerably higher before the ultimate top. As was the case in early 2001 and early 2007, the key pattern to watch for now is a major reversal of the Last Hour’s downtrend (a shift from lower lows to higher highs). That will signal the smart money distribution phase has ended, which usually means we’re not far from a major market top. Keep in mind it could be many months, or even a year or more before that occurs. Until then, look for the trend of ‘first hour outperformance/last hour underperformance’ to continue.
Last Hour Indicator Breaks Out Of Its Trading Range
By Rennie on Wednesday, November 18th, 2009 at 12:09 amSPY volume hit a fresh one-month low and NYSE volume nearly did the same as some traders got a jump on the upcoming holiday. Breadth settled well off session lows but still slightly negative on the session, keeping the Cumulative Breadth line from breaking out into new highs along with the S&P. TICKscore closed at +7, sending the cumulative TICKscore line up to, but not over its most recent high. It would be a positive sign to see these two indicators confirm the recent breakout. Cumulative TICK closed at +21,600. The 20-day moving average is still in the process of bottoming out, but negative readings from late October will begin falling off the average tomorrow and give it a natural boost.
S&P futures posted an inside day and an NR10 day, but more importantly managed to actually close higher on the session following Monday’s upside gap. That’s a sign buyers aren’t backing down. The last thirty occurrences of a higher close immediately following an unfilled upside gap for the front-month S&P contract are listed below…
S&P Futures Close Higher After Unfilled Upside Gap
11/17/09… S&P futures ??? two sessions later
11/10/09… S&P futures -0.4% two sessions later
10/15/09… S&P futures +0.1% two sessions later
10/09/09… S&P futures +0.1% two sessions later
10/07/09… S&P futures +1.4% 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
In 22 out of the last 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, however, with only five cases leading to a move of more than 1%.
After months in a trading range, the Last Hour indicator entered into a steep decline right around the time of the October peak and it hasn’t looked back. This is a ‘smart money’ indicator, and it implies a large amount of selling by this group has already taken place. Historically, steep declines tend to lead to lower lows on a longer-term basis, suggesting this could be just the beginning of a larger move. Pull up this chart for a good look at similarly precipitous declines in 2000, 2002, 2005 and 2007. The Last Hour is calculated by subtracting the stock market’s performance during the last hour of the session from the performance during the first hour. The formula is (today’s close – today’s 3pm price) – (today’s 10:30am price – yesterday’s close). A dropping Last Hour, like we’ve seen recently, indicates the last hour of the trading day is consistently underperforming the first hour. The idea behind the indicator is that dumb money gets pulled into the market during the first hour of the session while the smart money trades late in the day. So given recent action (higher prices, lower Last Hour indicator), we can surmise that investors are buying, but smart money is selling into strength. Nonetheless, we need to be careful about drawing bearish conclusions prematurely. Note from the long-term chart that the Last Hour indicator also fell sharply throughout the 2005-2007 stock market rally. While the indicator was ultimately proved correct in that it preceded the 2008 crash, it was two years before the trend of the Last Hour shifted out of a pattern of lower lows in late 2007. We’re currently finishing up the first month. This smart money indicator is warning that the rally will ultimately end badly, but it does not indicate ‘when’. Prices could move considerably higher before the ultimate top. As was the case in early 2001 and early 2007, the key pattern to watch for now is a major reversal of the Last Hour’s downtrend (a shift from lower lows to higher highs). That will signal the smart money distribution phase has ended, which usually means we’re not far from a major market top. Keep in mind it could be many months, or even a year or more before that occurs. Until then, look for the trend of ‘first hour outperformance/last hour underperformance’ to continue.