Cumulative TICK Hits New High for 2010, Down Volume Hits New Low

A technically strong day on Friday, with bullish NYSE TICK action and a surge in new 20-day and 52-week highs. While the board was somewhat mixed towards the end of last week, I continued to favor the long side because short-term buys were continuing to be triggered despite overbought conditions.  In general I find it’s best to overweight short-term buy signals in an overbought market or short-term sells in an oversold market.

Volume associated with advancing issues accounted for 92% of total volume on the NYSE, the second 90%+ up volume day in the past month. As noted in this intraday update, that’s usually a good indication we’ll see higher highs the following session, putting us on watch for a move above SPH 1138.70 on Monday.

Also note that the NYSE TICK never traded below -700, making Friday the highest intraday low in over a month. Historically, when the TICK reflects such lopsided activity, it usually leads to a trading-range environment the following session. As noted Friday, when the S&P hits a 15-day high and the TICK posts its highest low of the last 15 days, upside potential is usually capped at the 0.5% level the next day. In only one case out of the last thirty occurrences did the S&P gain more than 0.5%, suggesting that if & when the S&P rallies above Friday’s high, there probably won’t be much more upside for the day.

More than 800 individual issues across the NYSE and NASDAQ closed over their upper bollinger band, a sign of strong upside momentum. In the last few years, readings over 800 have typically translated into at least one subsequently higher S&P close within the next week. Below is every instance since 2006 (when our database begins) in which over 800 issues closed over their upper band…

800+ Stocks Close Over Upper Bollinger Band
03/05/10… ???
01/04/10… Higher S&P close one session later
10/14/09… Higher S&P close one session later
09/16/09… Higher S&P close four sessions later
07/23/09… Higher S&P close one session later
07/15/09… Higher S&P close one session later
06/01/09… Higher S&P close one session later
05/08/09… No higher S&P close within five days
05/04/09… Higher S&P close two sessions later
04/09/09… Higher S&P close one session later
03/26/09… Higher S&P close five sessions later
03/23/09… Higher S&P close three sessions later
01/02/09… Higher S&P close two sessions later
04/01/08… Higher S&P close three sessions later
12/06/07… Higher S&P close two sessions later
09/18/07… Higher S&P close one session later
04/16/07… Higher S&P close one session later
10/12/06… Higher S&P close one session later

Note that out of sixteen occurrences, all but one led to upside follow-through either immediately or after a shallow pullback.

Along similar lines, note that the 5-day RSI for the Nasdaq100 closed in technically overbought territory (above 75) for a fifth consecutive session Friday. Such persistence is usually a telling indication for the short-term, because the market is refusing to buckle despite overbought conditions. Historically, this type of action translates into even higher prices over the short-term. The table below lists each of the last thirty separate occurrences in which the NDX 5-day RSI initially closed above 75 five days in a row…

NDX 5-day RSI >75 Five Consecutive Sessions
03/05/10… ???
12/30/09… Higher NDX close two days later
09/15/09… Higher NDX close one day later
07/21/09… Higher NDX close one day later
06/05/09… Higher NDX close two days later
05/06/09… No higher close next 1-2 days
08/15/08… No higher close next 1-2 days
09/28/07… Higher NDX close one day later
07/18/07… Higher NDX close one day later
04/26/07… Higher NDX close one day later
11/17/06… Higher NDX close one day later
09/18/06… Higher NDX close two days later
11/23/05… Higher NDX close one day later
11/09/05… Higher NDX close one day later
07/15/05… Higher NDX close two days later
05/20/05… Higher NDX close one day later
11/08/04… No higher close next 1-2 days
06/01/04… No higher close next 1-2 days
01/09/04… Higher NDX close one day later
09/02/03… Higher NDX close two days later
03/20/03… Higher NDX close one day later
11/16/01… Higher NDX close one day later
08/29/00… Higher NDX close one day later
12/22/99… Higher NDX close one day later
11/04/99… Higher NDX close one day later
01/08/99… Higher NDX close one day later
11/23/98… Higher NDX close two days later
11/10/98… Higher NDX close one day later
07/14/98… Higher NDX close one day later
02/03/98… Higher NDX close one day later
07/14/97… Higher NDX close one day later

In 26 out of the past 30 occurrences, or 87% of the time, the Nasdaq100 proceeded to post a subsequently higher close (above the setup day’s close) within the next two sessions, significantly greater than the 66% random chance for a higher NDX close within the next two days.

Our TICKscore indicator closed at +21 Friday, with the cumulative version now only 17 points below its October high. Cumulative TICK trended steadily higher throughout the session and closed at a strong +114,000, its highest finish since last July. That has bullish implications for the intermediate-term. Historically, when Cumulative TICK hits a two-month high, the S&P has a good track record of continuing to push higher over the next two weeks. The last thirty occurrences are listed in the table below…

NYSE Cumulative TICK Hits a Two-Month High
03/05/10… S&P500 ??? two weeks later
02/02/10… S&P500 -0.4% two weeks later
12/23/09… S&P500 +2.2% two weeks later
12/01/09… S&P500 -0.1% two weeks later
07/15/09… S&P500 +4.6%  two weeks later
03/12/09… S&P500 +10.9% two weeks later
03/10/09… S&P500 +12.0% two weeks later
01/02/09… S&P500 -8.8% two weeks later (*)
10/13/08… S&P500 -15.4% two weeks later (*)
07/29/08… S&P500 +2.1% two weeks later
07/16/08… S&P500 +3.1% two weeks later
04/16/08… S&P500 +1.5% two weeks later
03/18/08… S&P500 +2.8% two weeks later
11/28/07… S&P500 +1.2% two weeks later
06/27/07… S&P500 +2.8% two weeks later
05/02/07… S&P500 +1.2% two weeks later
04/05/07… S&P500 +2.8% two weeks later
03/20/07… S&P500 +1.9% two weeks later
10/12/06… S&P500 +1.9% two weeks later
10/04/06… S&P500 +1.2% two weeks later
07/19/06… S&P500 +1.5% two weeks later
06/01/06… S&P500 -2.3% two weeks later (*)
04/18/06… S&P500 +0.4% two weeks later
01/03/06… S&P500 +0.7% two weeks later
11/02/05… S&P500 +1.4% two weeks later
05/18/05… S&P500 +1.6% two weeks later
02/04/05… S&P500 -0.1% two weeks later
01/31/05… S&P500 +2.1% two weeks later
11/04/04… S&P500 +1.9% two weeks later
05/25/04… S&P500 +1.6% two weeks later
05/11/04… S&P500 +1.6% two weeks later

In 24 out of the last 30 occurrences, or 80% of the time, the S&P was trading higher two weeks later, significantly better than the 57% at-any-time odds for a higher S&P ten trading days later in the same time frame. In only three cases was the S&P down 1%+ two weeks later, while it was up 1%+ twenty-two times.

Friday’s lopsided volume stats, with less than 7% of the day’s volume attributable to declining issues, sent the 20-day moving average of down volume below 40%. That’s traditionally a bullish sign from a longer-term perspective as it reflects an absence of selling pressure (see long-term chart). When the down volume average has been this low in the past, stocks have typically remained on firm footing over the next two months. The table below lists each of the last thirty instances in which the 20-day moving average of NYSE Down Volume fell below 40% for the first time in at least a month…

20day Average of Down Volume <40% First Time in a Month
03/05/10… S&P500 ??? two months later
08/03/09…  S&P500 +5.8% two months later
04/02/09…  S&P500 +13.0% two months later
12/19/08…  S&P500 -12.3% two months later (*)
04/16/07…  S&P500 +1.7% two months later
11/25/05…  S&P500 -0.1% two months later
11/17/04…  S&P500 +0.2% two months later
09/07/04…  S&P500 +0.8% two months later
01/06/04…  S&P500 +2.8% two months later
09/02/03…  S&P500 +2.4% two months later
05/09/03…  S&P500 +8.0% two months later
11/06/02…  S&P500 +0.6% two months later
11/02/98…  S&P500 +10.8% two months later
02/09/98…  S&P500 +9.8% two months later
05/05/97…  S&P500 +7.3% two months later
03/11/97…  S&P500 +0.5% two months later
01/10/97…  S&P500 +7.1% two months later
11/18/96…  S&P500 +4.4% two months later
08/12/96…  S&P500 +5.2% two months later
05/09/96…  S&P500 +1.1% two months later
02/01/96…  S&P500 +1.1% two months later
11/24/95…  S&P500 +2.1% two months later
01/09/95…  S&P500 +4.6% two months later
07/25/94…  S&P500 +2.0% two months later
05/19/94…  S&P500 -0.3% two months later
12/27/93…  S&P500 +0.2% two months later
10/14/93…  S&P500 -0.6% two months later
08/17/93…  S&P500 +1.8% two months later
05/20/93…  S&P500 -1.0% two months later
03/16/93… S&P500 -1.5% two months later
10/30/92…  S&P500 +4.6% two months later

In 24 out of the last 30 occurrences, or 80% of the time, the S&P was trading at a higher level two months later. That’s not significantly greater than the 62% at-any-time odds for a higher S&P two months later in the same time frame. However, note that the S&P was down more than 1.5% two months later only once out of the last thirty signals, or 3% of the time, far below the 27% random chance for a drop of over 1.5% in the next forty trading days. The S&P gained more than 1.5% seventeen times. This suggests the S&P is likely to find an area of longer-term support in the SPX 1120 area and will most likely be trading in this area or higher at the end of April.

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

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