Low Volume Breakout, part 1

S&P futures posted a third consecutive higher high on Tuesday, although the light volume prevented any bullish setups from being triggered. The S&P opened above the SPX 1075-1080 range associated with the pair of high NYSE TICK readings from last Tuesday/Thursday and never looked back. At the close, breadth was nearly 5:1 in favor of advancing issues and upside volume accounted for just over 90% of total NYSE volume. The equity put/call closed at .62, its second consecutive down day. Keep an eye on this indicator Wednesday as a third lower close would have bullish implications (see this column from last week for details).

From a longer-term perspective we’re still setting up to see the monthly signal discussed in this February 4th column triggered at the end of February, indicating a possible test of the January high next month. That doesn’t tell us much about the next two weeks, however, and there’s not much to lean on at the moment given that most of the trading setups fell off the board Tuesday. NYSE floor volume fell over 20% Tuesday due to an inexplicable jump in volume last Friday. Intraday volume for 2/12 tracked volume for 2/11 very closely (see relative volume chart) , yet end-of-day data reported a big 33% increase. While it’s normal to have some variation between intraday and final numbers, this was a much larger than average deviation (more on this in part 2). It’s also worth noting that consolidated volume was only up 3% last Friday and down about 10% Tuesday. Regardless, as it stands the setup below was technically triggered given the lopsided positive breadth and low volume…

The last thirty times that NYSE volume fell 20%+ from the previous day on a 2:1+ positive breadth session are listed in the table below. Note that in 22 out of 30 cases, or 73% of the time, the S&P closed lower (below the setup day’s close) two sessions later, significantly greater than the 48% random odds for a lower S&P close two sessions later in the same time frame. Only two cases led to an S&P up more than 1% two days later, while fourteen led to an S&P down more than 1% two days later…

2:1 Positive Breadth & NYSE Volume Down 20%+
02/16/10… S&P500 ??? two sessions later
02/01/10… S&P500 +0.7% two sessions later
01/19/10… S&P500 -2.9% two sessions later
12/24/09… S&P500 -0.0% two sessions later
12/21/09… S&P500 +0.6% two sessions later
10/19/09… S&P500 -1.5% two sessions later
10/05/09… S&P500 +1.7% two sessions later (*)
07/01/09… S&P500 -2.7% two sessions later
04/03/09… S&P500 -3.2% two sessions later
03/23/09… S&P500 -1.1% two sessions later
03/17/09… S&P500 +0.8% two sessions later
11/26/08… S&P500 -8.1% two sessions later
10/20/08… S&P500 -9.0% two sessions later
10/13/08… S&P500 -9.5% two sessions later
03/24/08… S&P500 -0.7% two sessions later
01/14/08… S&P500 -3.0% two sessions later
12/24/07… S&P500 -1.3% two sessions later
11/23/07… S&P500 -0.9% two sessions later
06/01/07… S&P500 -0.4% two sessions later
05/25/07… S&P500 +1.0% two sessions later
03/19/07… S&P500 +2.4% two sessions later (*)
03/15/07… S&P500 +0.7% two sessions later
07/03/06… S&P500 -0.5% two sessions later
05/25/06… S&P500 -1.0% two sessions later
11/24/04… S&P500 -0.3% two sessions later
05/11/04… S&P500 +0.1% two sessions later
03/12/04… S&P500 -0.9% two sessions later
10/25/02… S&P500 -1.7% two sessions later
07/05/02… S&P500 -3.7% two sessions later
06/17/02… S&P500 -1.6% two sessions later
01/31/02… S&P500 -3.2% two sessions later

Part 2 of this column will be posted later today

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

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