Jump in New 52-Week Lows on Inside Day for S&P

Following Friday’s unfilled downside gap, Nasdaq futures closed higher Monday but posted a lower high. That’s not a particularly positive price pattern. Listed below are all instances in which this same two-day pattern was observed since inception of the Nasdaq futures contract…

Nas Futures Close Up, Post Lower High after Unfilled Down Gap
11/30/09… ???
04/21/09… Lower NDX close one session later
01/08/09… Lower NDX close one session later
12/02/08… Lower NDX close two sessions later
11/07/08… Lower NDX close one session later
01/23/08… Lower NDX close two sessions later
02/28/07… Lower NDX close one session later
02/06/06… Lower NDX close one session later
08/31/04… No lower close in next 1-2 sessions
08/09/04… No lower close in next 1-2 sessions
07/07/04… Lower NDX close one session later
09/11/03… Lower NDX close two sessions later
04/01/03… No lower close in next 1-2 sessions
09/13/02… Lower NDX close one session later
09/04/02… Lower NDX close one session later
02/20/02… Lower NDX close one session later
12/21/01… Lower NDX close one session later
07/09/01… Lower NDX close one session later
06/15/01… Lower NDX close one session later
02/12/01… Lower NDX close one session later
10/26/00… Lower NDX close two sessions later
05/22/00… Lower NDX close one session later
07/21/99… Lower NDX close one session later
01/22/99… No lower close in next 1-2 sessions
10/02/98… Lower NDX close one session later

The results tend to favor short-term weakness, with 20 out of 24 occurrences leading to a lower NDX close (below the setup day’s close) within the next two sessions. However, the sample is a bit too small to be considered significant.

Ten days ago, when the S&P was trading at essentially the same level, new 52-week lows on the NYSE were virtually nonexistent (2). On Monday, even as the S&P held above Friday’s lows, new 52-week lows expanded to 16, tying the highest level of the last two months. That’s an unusual development given that the S&P closed above its ten-day ago level. When we’ve seen similar action in the past, the relatively high number of new lows suggests a bit of weakness under the surface, and market performance has typically been subpar over the next couple of sessions. The last thirty times this pattern has occurred are listed in the table below…

New Lows @ Two-Month High, SPX Up vs. Ten Days Ago
11/30/09… S&P500 ??? two sessions later
02/05/09… S&P500 +2.8% two sessions later
11/02/07… S&P500 +0.7% two sessions later
07/24/07… S&P500 -1.9% two sessions later
07/18/07… S&P500 -0.8% two sessions later
02/23/07… S&P500 -3.6% two sessions later
02/12/07… S&P500 +1.5% two sessions later
01/24/07… S&P500 -1.2% two sessions later
01/19/07… S&P500 -0.2% two sessions later
04/06/06… S&P500 -1.0% two sessions later
09/16/05… S&P500 -1.3% two sessions later
04/13/04… S&P500 -0.1% two sessions later
04/05/04… S&P500 -0.9% two sessions later
01/02/04… S&P500 +1.4% two sessions later
12/11/03… S&P500 -0.3% two sessions later
08/04/03… S&P500 -1.6% two sessions later
07/15/03… S&P500 -1.9% two sessions later
12/13/99… S&P500 -0.2% two sessions later
10/13/99… S&P500 -3.0% two sessions later
06/11/99… S&P500 +0.6% two sessions later
06/12/98… S&P500 -1.0% two sessions later
04/23/98… S&P500 -3.0% two sessions later
03/30/98… S&P500 +1.3% two sessions later
03/26/98… S&P500 -0.7% two sessions later
01/12/98… S&P500 +2.0% two sessions later
07/07/97… S&P500 -0.5% two sessions later
03/14/97… S&P500 -0.4% two sessions later
10/22/96… S&P500 -0.6% two sessions later
06/12/96… S&P500 -0.5% two sessions later
10/24/95… S&P500 -1.7% two sessions later
09/27/95… S&P500 +0.6% two sessions later

Note that in 22 out of 30 occurrences, or 73% of the time, the S&P was trading lower two sessions later, significantly above the 47% at-any-time odds for a lower S&P close two sessions later in the same time frame.  Only five times was the S&P up 1% or more two trading days later, while it was down 1%+ eleven times. In general, when new 52-week lows are at a relatively high level and the S&P is up over the past two weeks, the market tends to struggle over the short-term.

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

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