New 20-day Highs Fail to Keep Up with S&P

NYSE breadth closed nearly 2:1 positive Friday, sending the Cumulative Breadth line into new highs for the year. TICKscore closed at +11, the fourteenth positive TICKscore reading out of the last fifteen sessions, a sign that institutions have shown little interest in selling during the recent trading range. Cumulative TICK settled at +60,000, sending the 20-day moving average above its recent high.

One indication suggests the market will have a tough time moving higher on Monday. Despite S&P futures posting a solid rally day after an upside gap, with a higher high, low and close, new 20-day highs across all exchanges fell from the previous session while new 20-day lows increased. That suggests a bit more weakness beneath the surface than what was reflected by the S&P on Friday. Historically, this type of action has led to sub-par performance the following session.

The table below highlights the last thirty instances in which S&P futures posted a ‘rally day’ (higher high, higher low, higher close) and new 20-day highs across all exchanges declined from the previous session. Note the consistent theme of limited upside potential the next day…

Rally Day for S&P Futures, New 20-day Highs Drop
12/11/09… S&P futures ??? next session
11/18/09… S&P futures -1.3%  next session
11/10/09… S&P futures +0.4% next session
10/15/09… S&P futures -0.7% next session
10/09/09… S&P futures +0.3% next session
08/25/09… S&P futures +0.1% next session
08/04/09… S&P futures -0.4% next session
07/24/09… S&P futures +0.2% next session
07/21/09… S&P futures -0.4% next session
06/29/09… S&P futures -0.6% next session
06/02/09… S&P futures -1.2% next session
05/14/09… S&P futures -0.7% next session
05/08/09… S&P futures -1.7% next session
05/05/09… S&P futures +1.5% next session  (*)
04/13/09… S&P futures -1.6% next session
03/04/09… S&P futures -3.2% next session
10/13/08… S&P futures -1.4% next session
04/17/08… S&P futures +1.1% next session  (*)
12/24/07… S&P futures +0.2% next session
11/23/07… S&P futures -2.3% next session
09/13/07… S&P futures +0.0% next session
08/13/07… S&P futures -1.4% next session
07/13/07… S&P futures -0.0% next session
05/07/07… S&P futures -0.1% next session
04/26/07… S&P futures -0.1% next session
04/17/07… S&P futures +0.1% next session
03/23/07… S&P futures -0.1% next session
02/15/07… S&P futures -0.1% next session
02/02/07… S&P futures +0.0% next session
01/12/07… S&P futures -0.2% next session
11/16/06… S&P futures -0.0% next session

In 20 out of 30 cases, or 67% of the time, the S&P closed lower the following session, significantly greater than the 46% at-any-time odds for a lower S&P close one day later in the same period of time. In only two cases did the S&P gain 0.5%+ the following session, while it fell 0.5%+ eleven times.

Looking beyond Monday, S&P futures did trigger a bullish ‘gap & go’ price pattern Friday by posting a higher high, low and close immediately after an unfilled upside gap. This reflects underlying bullish momentum that usually leads to a flat-to-up S&P two trading days later. The last thirty times that the front-month S&P contract posted a higher high, low and close immediately after an unfilled upside gap are listed in the table below…

S&P Futures Post Higher High, Low & Close After Upside Gap
12/11/09… 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
09/09/09… S&P futures +0.9% 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
11/25/08… S&P futures +4.9% 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
12/24/07… 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
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
03/14/03… S&P futures +4.0% two sessions later
01/03/03… S&P futures +1.5% two sessions later
11/15/02… S&P futures -1.2% two  sessions later (*)
10/14/02… S&P futures +2.5% two sessions later

Note that in 23 out of 30 occurrences, or 77% of the time, the S&Ps settled at a higher level two sessions later, well above the 52% random odds of a higher S&P two days later. Only two cases led to an S&P down more than 0.6% two sessions later, suggesting weakness on Monday could be followed by a rebound on Tuesday.

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

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