Volume Building as New 52-week Highs Surge

Stock indexes settled mixed Tuesday. Institutional participation remained light, but volume continued to build. NYSE floor volume increased for the third day in a row, which is noteworthy considering that S&P futures posted a third consecutive higher high. That triggers a short-term bullish signal that hasn’t been seen in over two years. Historically, when volume consistently expands over a three-day time span as the S&P makes higher highs, it’s a bullish sign looking out the following three days. The last 30 occurrences of this pattern are listed in the table below…

NYSE Volume Up Three Days in a Row, S&P Futures Post Higher Highs
01/05/10… S&P futures ??? three sessions later
05/31/07… S&P futures +0.1% three sessions later
04/18/07… S&P futures +0.5% three sessions later
08/16/06… S&P futures +0.3% three sessions later
07/27/06… S&P futures +0.4% three sessions later
03/16/06… S&P futures -0.7% three sessions later
06/15/05… S&P futures +0.7% three sessions later
12/16/04… S&P futures +0.1% three sessions later
04/02/04… S&P futures +0.0% three sessions later
12/03/03… S&P futures +0.4% three sessions later
07/09/03… S&P futures +0.2% three sessions later
06/06/03… S&P futures +1.0% three sessions later
08/15/02… S&P futures +1.0% three sessions later
11/08/01… S&P futures +1.6% three sessions later
11/07/01… S&P futures -0.2% three sessions later
05/17/01… S&P futures +1.7% three sessions later
01/19/01… S&P futures +1.6% three sessions later
01/11/01… S&P futures +0.5% three sessions later
07/13/00… S&P futures +0.1% three sessions later
06/28/00… S&P futures +1.3% three sessions later
06/02/00… S&P futures -0.3% three sessions later
06/01/00… S&P futures +0.8% three sessions later
02/03/00… S&P futures +0.7% three sessions later
08/25/99… S&P futures -4.1% three sessions later
06/30/99… S&P futures +1.6% three sessions later
04/08/99… S&P futures +0.5% three sessions later
12/30/98… S&P futures +0.9% three sessions later
11/23/98… S&P futures +0.0% three sessions later
04/15/98… S&P futures +0.1% three sessions later
01/29/98… S&P futures +2.4% three sessions later
08/07/97… S&P futures -3.0% three sessions later

Note that in 25 out of the last 30 occurrences, or 83% of the time, S&P futures settled higher three days after this pattern occurred, significantly above the 53% random chance for a higher S&P three days later in the same time frame. Gains were not especially large – only 6 occurrences out of 25 led to a gain of over 1% three days later. Barring any new developments, this tells us that a down day in the next day or two could represent a buying opportunity heading into Friday’s close.

From a longer-term perspective, it was a positive sign to see renewed strength in the 52-week high data. Just over 400 issues hit new annual highs on the NYSE Tuesday, the second time in the last two weeks we’ve registered over 400 new highs. While instances are low, clusters of 400+ readings have been a consistently bullish indication looking out a full year. It’s particularly noteworthy that this follows another similar cluster back in October, suggesting the longer-term uptrend remains intact. See my January 3rd column for more on this topic.

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

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