Improving Advance/Decline Ratio Sends Cumulative Breadth into New All-time Highs
By
Rennie on Monday, December 14th, 2009 at 8:58 pm
NYSE TICK barely traded below -800 Monday, reflecting a real absence of institutional selling interest. TICKscore closed at +7, Cumulative TICK +70,000. Breadth closed better than 2:1 positive on the NYSE, sending the Cumulative Breadth line into new all-time highs, above the 2007 top. That’s only the sixth time in the last thirty years that we’ve seen a fresh 10-year high for the cumulative breadth line, a generally bullish sign from a longer-term perspective (see chart).
NYSE breadth triggered an interesting short-term setup Monday. The advance/decline ratio closed at 2.86, up from 1.95 on Friday, 1.53 on Thursday, 1.24 on Wednesday and 0.45 last Tuesday. Historically, when breadth improves four consecutive sessions, buying power is usually exhausted for the short-term, and the S&P tends to close flat-to-down the next day. The last thirty times that the NYSE advance/decline ratio (initially) improved from the previous session on four consecutive days are listed in the table below…
NYSE Breadth Improves Four Consecutive Sessions
12/14/09… S&P500 ??? next session
06/19/09… S&P500 -3.1% next session
01/28/09… S&P500 -3.3% next session
07/19/06… S&P500 -0.9% next session
06/09/06… S&P500 -1.3% next session
09/26/05… S&P500 +0.0% next session
08/11/05… S&P500 -0.6% next session
04/07/05… S&P500 -0.8% next session
11/12/04… S&P500 -0.0% next session
05/25/04… S&P500 +0.2% next session
08/28/03… S&P500 +0.5% next session
05/31/02… S&P500 -2.5% next session
06/28/01… S&P500 -0.1% next session
10/31/00… S&P500 -0.6% next session
06/28/00… S&P500 -0.9% next session
02/03/00… S&P500 -0.0% next session
06/16/99… S&P500 +0.7% next session (*)
05/20/99… S&P500 -0.6% next session
11/02/98… S&P500 -0.1% next session
12/01/97… S&P500 -0.3% next session
07/30/97… S&P500 +0.2% next session
03/04/97… S&P500 +1.4% next session (*)
08/02/96… S&P500 -0.3% next session
10/13/95… S&P500 -0.3% next session
09/05/95… S&P500 +0.2% next session
02/23/95… S&P500 +0.3% next session
12/14/94… S&P500 +0.1% next session
10/28/94… S&P500 -0.3% next session
10/11/94… S&P500 -0.1% next session
07/14/94… S&P500 +0.2% next session
03/07/94… S&P500 -0.2% next session
Note that in 20 out of the last 30 occurrences, or 67% of the time, the S&P500 settled lower the following session, significantly greater than the 47% random chance for a lower S&P close one day later in the same time frame. In only two cases out of thirty did the S&P gain more than 0.5% the next day, while it fell more than 0.5% ten times.
Improving Advance/Decline Ratio Sends Cumulative Breadth into New All-time Highs
By Rennie on Monday, December 14th, 2009 at 8:58 pmNYSE TICK barely traded below -800 Monday, reflecting a real absence of institutional selling interest. TICKscore closed at +7, Cumulative TICK +70,000. Breadth closed better than 2:1 positive on the NYSE, sending the Cumulative Breadth line into new all-time highs, above the 2007 top. That’s only the sixth time in the last thirty years that we’ve seen a fresh 10-year high for the cumulative breadth line, a generally bullish sign from a longer-term perspective (see chart).
NYSE breadth triggered an interesting short-term setup Monday. The advance/decline ratio closed at 2.86, up from 1.95 on Friday, 1.53 on Thursday, 1.24 on Wednesday and 0.45 last Tuesday. Historically, when breadth improves four consecutive sessions, buying power is usually exhausted for the short-term, and the S&P tends to close flat-to-down the next day. The last thirty times that the NYSE advance/decline ratio (initially) improved from the previous session on four consecutive days are listed in the table below…
NYSE Breadth Improves Four Consecutive Sessions
12/14/09… S&P500 ??? next session
06/19/09… S&P500 -3.1% next session
01/28/09… S&P500 -3.3% next session
07/19/06… S&P500 -0.9% next session
06/09/06… S&P500 -1.3% next session
09/26/05… S&P500 +0.0% next session
08/11/05… S&P500 -0.6% next session
04/07/05… S&P500 -0.8% next session
11/12/04… S&P500 -0.0% next session
05/25/04… S&P500 +0.2% next session
08/28/03… S&P500 +0.5% next session
05/31/02… S&P500 -2.5% next session
06/28/01… S&P500 -0.1% next session
10/31/00… S&P500 -0.6% next session
06/28/00… S&P500 -0.9% next session
02/03/00… S&P500 -0.0% next session
06/16/99… S&P500 +0.7% next session (*)
05/20/99… S&P500 -0.6% next session
11/02/98… S&P500 -0.1% next session
12/01/97… S&P500 -0.3% next session
07/30/97… S&P500 +0.2% next session
03/04/97… S&P500 +1.4% next session (*)
08/02/96… S&P500 -0.3% next session
10/13/95… S&P500 -0.3% next session
09/05/95… S&P500 +0.2% next session
02/23/95… S&P500 +0.3% next session
12/14/94… S&P500 +0.1% next session
10/28/94… S&P500 -0.3% next session
10/11/94… S&P500 -0.1% next session
07/14/94… S&P500 +0.2% next session
03/07/94… S&P500 -0.2% next session
Note that in 20 out of the last 30 occurrences, or 67% of the time, the S&P500 settled lower the following session, significantly greater than the 47% random chance for a lower S&P close one day later in the same time frame. In only two cases out of thirty did the S&P gain more than 0.5% the next day, while it fell more than 0.5% ten times.