No Sellers as S&P Futures Post Third Unfilled Upside Gap
By
Rennie on Friday, March 5th, 2010 at 1:40 pm
Interesting to note that the NYSE TICK hasn’t traded below -400 so far Friday. The last time we saw such an absence of selling pressure was Christmas Eve. While an absence of large negative TICK readings is an obvious positive for the day, it usually leads to a sideways trading range the following session. When the S&P closes at a three-week high on the same day that the TICK posts its highest intraday low in three weeks (as it’s set to do today), next-day gains have been consistently below average. Over the past thirty occurrences stretching back nearly five years, the S&P gained more than 0.5% the next day only once, suggesting limited upside potential on Monday. For this setup to go into effect, today’s intraday TICK low needs to hold above -761.
SPX 15-day High, NYSE TICK Highest Low in 15 Days
02/18/10… S&P500 +0.2% next day
12/24/09… S&P500 +0.1% next day
12/22/09… S&P500 +0.2% next day
11/09/09… S&P500 -0.0% next day
10/19/09… S&P500 -0.6% next day
09/22/09… S&P500 -1.0% next day
09/16/09… S&P500 -0.3% next day
08/21/09… S&P500 -0.1% next day
07/15/09… S&P500 +0.9% next day (*)
05/18/09… S&P500 -2.2% next day
04/09/09… S&P500 +0.3% next day
08/05/08… S&P500 +0.3% next day
05/15/08… S&P500 +0.2% next day
05/01/08… S&P500 +0.3% next day
05/30/07… S&P500 +0.0% next day
05/02/07… S&P500 +0.4% next day
04/05/07… S&P500 +0.1% next day
01/24/07… S&P500 -1.1% next day
10/16/06… S&P500 -0.4% next day
10/12/06… S&P500 +0.2% next day
10/04/06… S&P500 +0.2% next day
08/16/06… S&P500 +0.2% next day
07/03/06… S&P500 -0.7% next day
06/29/06… S&P500 -0.2% next day
05/05/06… S&P500 -0.1% next day
04/05/06… S&P500 -0.2% next day
02/16/06… S&P500 -0.2% next day
11/25/05… S&P500 -0.9% next day
11/02/05… S&P500 +0.4% next day
09/09/05… S&P500 -0.1% next day
From an intermediate-term perspective, it’s noteworthy that the NDX is set to close higher for an eighth consecutive session. Historically, this many consecutive up days is an indication of an unusually persistent uptrend that normally leads to further gains over the next week. Below I’ve listed every instance since 1986 in which the Nasdaq100 index (NDX) closed higher eight sessions in a row, followed by the performance of the NDX over the next five trading days. Despite the overbought conditions, note that eighteen out of twenty-one occurrences led to a higher NDX close one week later…
Nasdaq100 Up Eight Consecutive Sessions
03/05/10… Nasdaq ??? one week later
11/11/09… Nasdaq +1.1% one week later
10/14/09… Nasdaq -0.0% one week later
07/17/09… Nasdaq +4.1% one week later
05/24/05… Nasdaq +1.2% one week later
06/01/04… Nasdaq +1.9% one week later
12/27/99… Nasdaq +5.3% one week later
11/08/96… Nasdaq +0.1% one week later
09/20/96… Nasdaq +0.2% one week later
07/10/95… Nasdaq +4.1% one week later
08/17/94… Nasdaq +0.4% one week later
01/02/92… Nasdaq +5.1% one week later
05/31/91… Nasdaq -3.0% one week later
02/01/91… Nasdaq +4.3% one week later
12/03/90… Nasdaq +2.5% one week later
05/09/90… Nasdaq +4.5% one week later
10/09/89… Nasdaq -5.0% one week later
09/14/88… Nasdaq +0.5% one week later
01/13/87… Nasdaq +4.3% one week later
05/29/86… Nasdaq +0.5% one week later
04/17/86… Nasdaq +0.5% one week later
02/11/86… Nasdaq +1.0% one week later
Friday’s upside gap has positive implications from a longer-term perspective, given that it comes just three days after another unfilled upside gap on March 2nd. When sellers can’t drive the market lower to fill a gap and then a second upside gap appears, it’s usually a sign that sellers are overwhelmed. While conditions can often turn choppy after the second gap, the market has a good track record of rebounding from short-term weakness and settling flat-to-higher one month later. The table below lists each of the last thirty instances in which two unfilled upside gaps formed within a one-month time frame, along with the performance of the S&P500 looking out twenty trading days. To qualify for inclusion, the first gap must remain unfilled when the second gap appears. Note that this is the second time this pattern has been triggered in the last week…
Two Unfilled Upside Gaps In a One-Month Time Frame
03/02/10 & 03/05/10… S&P500 ??? one month later
03/01/10 & 03/02/10… S&P500 ??? one month later
12/21/09 & 12/24/09… S&P500 -3.1% one month later (*)
12/10/09 & 12/14/09… S&P500 +3.0% one month later
11/09/09 & 11/16/09… S&P500 +0.2% one month later
10/08/09 & 10/14/09… S&P500 +0.8% one month later
10/06/09 & 10/08/09… S&P500 -0.1% one month later
07/30/09 & 08/21/09… S&P500 +3.8% one month later
07/15/09 & 07/30/09… S&P500 +4.5% one month later
04/02/09 & 04/09/09… S&P500 +8.5% one month later
11/24/08 & 12/08/08… S&P500 -0.3% one month later
04/16/08 & 04/18/08… S&P500 +2.5% one month later
03/18/08 & 03/24/08… S&P500 +2.8% one month later
12/21/07 & 12/24/07… S&P500 -10.2% one month later (*)
11/28/07 & 12/05/07… S&P500 -5.0% one month later (*)
04/16/07 & 04/20/07… S&P500 +2.3% one month later
04/03/07 & 04/16/07… S&P500 +2.3% one month later
06/15/06 & 06/29/06… S&P500 -0.1% one month later
10/31/05 & 11/17/05… S&P500 +1.7% one month later
05/18/05 & 05/26/05… S&P500 -0.6% one month later
10/01/04 & 10/04/04… S&P500 -0.4% one month later
11/24/03 & 12/01/03… S&P500 +3.8% one month later
03/13/03 & 04/02/03… S&P500 +4.3% one month later
10/15/02 & 10/17/02… S&P500 +2.7% one month later
10/11/02 & 10/15/02… S&P500 +0.2% one month later
11/13/01 & 12/05/01… S&P500 +0.5% one month later
11/05/01 & 11/13/01… S&P500 -0.3% one month later
09/24/01 & 09/28/01… S&P500 +5.6% one month later
04/10/01 & 04/18/01… S&P500 +3.4% one month later
10/28/99 & 10/29/99… S&P500 +2.5% one month later
03/25/99 & 03/29/99… S&P500 +4.6% one month later
03/05/99 & 03/25/99… S&P500 +4.7% one month later
In 21 out of the last 30 cases, or 70% of the time, the S&P500 was trading higher one month later. That’s not significantly better than the 56% random odds of a higher S&P one month later. But note that of the nine times the S&P failed to rally, it finished down 1%+ one month later only three times out of thirty (or 10% of the time). In the same period, the random chance for a drop of 1%+ over any twenty-day period was much higher at 32%. So when two unfilled upside gaps appear in a short period of time, we can infer downside potential is likely to be limited (<1%) over the coming month.
No Sellers as S&P Futures Post Third Unfilled Upside Gap
By Rennie on Friday, March 5th, 2010 at 1:40 pmInteresting to note that the NYSE TICK hasn’t traded below -400 so far Friday. The last time we saw such an absence of selling pressure was Christmas Eve. While an absence of large negative TICK readings is an obvious positive for the day, it usually leads to a sideways trading range the following session. When the S&P closes at a three-week high on the same day that the TICK posts its highest intraday low in three weeks (as it’s set to do today), next-day gains have been consistently below average. Over the past thirty occurrences stretching back nearly five years, the S&P gained more than 0.5% the next day only once, suggesting limited upside potential on Monday. For this setup to go into effect, today’s intraday TICK low needs to hold above -761.
SPX 15-day High, NYSE TICK Highest Low in 15 Days
02/18/10… S&P500 +0.2% next day
12/24/09… S&P500 +0.1% next day
12/22/09… S&P500 +0.2% next day
11/09/09… S&P500 -0.0% next day
10/19/09… S&P500 -0.6% next day
09/22/09… S&P500 -1.0% next day
09/16/09… S&P500 -0.3% next day
08/21/09… S&P500 -0.1% next day
07/15/09… S&P500 +0.9% next day (*)
05/18/09… S&P500 -2.2% next day
04/09/09… S&P500 +0.3% next day
08/05/08… S&P500 +0.3% next day
05/15/08… S&P500 +0.2% next day
05/01/08… S&P500 +0.3% next day
05/30/07… S&P500 +0.0% next day
05/02/07… S&P500 +0.4% next day
04/05/07… S&P500 +0.1% next day
01/24/07… S&P500 -1.1% next day
10/16/06… S&P500 -0.4% next day
10/12/06… S&P500 +0.2% next day
10/04/06… S&P500 +0.2% next day
08/16/06… S&P500 +0.2% next day
07/03/06… S&P500 -0.7% next day
06/29/06… S&P500 -0.2% next day
05/05/06… S&P500 -0.1% next day
04/05/06… S&P500 -0.2% next day
02/16/06… S&P500 -0.2% next day
11/25/05… S&P500 -0.9% next day
11/02/05… S&P500 +0.4% next day
09/09/05… S&P500 -0.1% next day
From an intermediate-term perspective, it’s noteworthy that the NDX is set to close higher for an eighth consecutive session. Historically, this many consecutive up days is an indication of an unusually persistent uptrend that normally leads to further gains over the next week. Below I’ve listed every instance since 1986 in which the Nasdaq100 index (NDX) closed higher eight sessions in a row, followed by the performance of the NDX over the next five trading days. Despite the overbought conditions, note that eighteen out of twenty-one occurrences led to a higher NDX close one week later…
Nasdaq100 Up Eight Consecutive Sessions
03/05/10… Nasdaq ??? one week later
11/11/09… Nasdaq +1.1% one week later
10/14/09… Nasdaq -0.0% one week later
07/17/09… Nasdaq +4.1% one week later
05/24/05… Nasdaq +1.2% one week later
06/01/04… Nasdaq +1.9% one week later
12/27/99… Nasdaq +5.3% one week later
11/08/96… Nasdaq +0.1% one week later
09/20/96… Nasdaq +0.2% one week later
07/10/95… Nasdaq +4.1% one week later
08/17/94… Nasdaq +0.4% one week later
01/02/92… Nasdaq +5.1% one week later
05/31/91… Nasdaq -3.0% one week later
02/01/91… Nasdaq +4.3% one week later
12/03/90… Nasdaq +2.5% one week later
05/09/90… Nasdaq +4.5% one week later
10/09/89… Nasdaq -5.0% one week later
09/14/88… Nasdaq +0.5% one week later
01/13/87… Nasdaq +4.3% one week later
05/29/86… Nasdaq +0.5% one week later
04/17/86… Nasdaq +0.5% one week later
02/11/86… Nasdaq +1.0% one week later
Friday’s upside gap has positive implications from a longer-term perspective, given that it comes just three days after another unfilled upside gap on March 2nd. When sellers can’t drive the market lower to fill a gap and then a second upside gap appears, it’s usually a sign that sellers are overwhelmed. While conditions can often turn choppy after the second gap, the market has a good track record of rebounding from short-term weakness and settling flat-to-higher one month later. The table below lists each of the last thirty instances in which two unfilled upside gaps formed within a one-month time frame, along with the performance of the S&P500 looking out twenty trading days. To qualify for inclusion, the first gap must remain unfilled when the second gap appears. Note that this is the second time this pattern has been triggered in the last week…
Two Unfilled Upside Gaps In a One-Month Time Frame
03/02/10 & 03/05/10… S&P500 ??? one month later
03/01/10 & 03/02/10… S&P500 ??? one month later
12/21/09 & 12/24/09… S&P500 -3.1% one month later (*)
12/10/09 & 12/14/09… S&P500 +3.0% one month later
11/09/09 & 11/16/09… S&P500 +0.2% one month later
10/08/09 & 10/14/09… S&P500 +0.8% one month later
10/06/09 & 10/08/09… S&P500 -0.1% one month later
07/30/09 & 08/21/09… S&P500 +3.8% one month later
07/15/09 & 07/30/09… S&P500 +4.5% one month later
04/02/09 & 04/09/09… S&P500 +8.5% one month later
11/24/08 & 12/08/08… S&P500 -0.3% one month later
04/16/08 & 04/18/08… S&P500 +2.5% one month later
03/18/08 & 03/24/08… S&P500 +2.8% one month later
12/21/07 & 12/24/07… S&P500 -10.2% one month later (*)
11/28/07 & 12/05/07… S&P500 -5.0% one month later (*)
04/16/07 & 04/20/07… S&P500 +2.3% one month later
04/03/07 & 04/16/07… S&P500 +2.3% one month later
06/15/06 & 06/29/06… S&P500 -0.1% one month later
10/31/05 & 11/17/05… S&P500 +1.7% one month later
05/18/05 & 05/26/05… S&P500 -0.6% one month later
10/01/04 & 10/04/04… S&P500 -0.4% one month later
11/24/03 & 12/01/03… S&P500 +3.8% one month later
03/13/03 & 04/02/03… S&P500 +4.3% one month later
10/15/02 & 10/17/02… S&P500 +2.7% one month later
10/11/02 & 10/15/02… S&P500 +0.2% one month later
11/13/01 & 12/05/01… S&P500 +0.5% one month later
11/05/01 & 11/13/01… S&P500 -0.3% one month later
09/24/01 & 09/28/01… S&P500 +5.6% one month later
04/10/01 & 04/18/01… S&P500 +3.4% one month later
10/28/99 & 10/29/99… S&P500 +2.5% one month later
03/25/99 & 03/29/99… S&P500 +4.6% one month later
03/05/99 & 03/25/99… S&P500 +4.7% one month later
In 21 out of the last 30 cases, or 70% of the time, the S&P500 was trading higher one month later. That’s not significantly better than the 56% random odds of a higher S&P one month later. But note that of the nine times the S&P failed to rally, it finished down 1%+ one month later only three times out of thirty (or 10% of the time). In the same period, the random chance for a drop of 1%+ over any twenty-day period was much higher at 32%. So when two unfilled upside gaps appear in a short period of time, we can infer downside potential is likely to be limited (<1%) over the coming month.