Afternoon Recovery Redux

Last Monday we discussed the implications of the afternoon recovery in which the S&P managed a higher close after trading sharply lower intraday. As you may recall, the recovery pattern was not a bullish sign for the short-term, triggering two separate sell signals that pointed to a lower close within the next couple of days. Both of those signals were triggered again at today’s close, given that the NYSE advance/decline ratio closed well below .75 and the SPX managed a higher finish after trading sharply lower intraday. So while the sell signal outlined in an earlier intraday update was not triggered, we actually ended up with more bearish signals for the short-term. In addition, I’d note the NYSE TICK ran up to a high +1531 during the last hour (a new high for the year), which could signal buying power is at/near a short-term exhaustion point. Looking back at previous instances in which the NYSE TICK initially recorded its highest reading in two months, there’s a tendency for the market to trade lower short-term. The last thirty occurrences are listed in the table below…

NYSE TICK Hits Two-Month High
05/25/10… ???
03/23/10… Lower S&P close one session later
02/11/10… Lower S&P close one session later
02/09/10… Lower S&P close one session later
11/27/09… No lower close within two sessions
09/04/09… No lower close within two sessions
08/27/09… Lower S&P close one session later
08/21/09… Lower S&P close one session later
05/18/09… Lower S&P close one session later
02/24/09… Lower S&P close one session later
10/17/08… No lower close within two sessions
09/18/08… No lower close within two sessions
09/05/08… Lower S&P close two sessions later
07/08/08… Lower S&P close one session later
03/26/08… Lower S&P close one session later
01/23/08… Lower S&P close two sessions later
06/27/07… Lower S&P close one session later
06/12/07… No lower close within two sessions
06/08/07… Lower S&P close two sessions later
03/21/07… Lower S&P close one session later
03/12/07… Lower S&P close one session later
12/20/06… Lower S&P close one session later
11/30/06… Lower S&P close one session later
08/29/06… Lower S&P close one session later
05/19/06… Lower S&P close one session later
01/03/06… No lower close within two sessions
04/12/05… Lower S&P close one session later
04/07/05… Lower S&P close one session later
07/12/04… Lower S&P close two sessions later
05/14/04… Lower S&P close one session later
05/12/04… Lower S&P close one session later

Over the past 30 occurrences, this pattern has led to a lower S&P close (below the setup day’s close) within the next two sessions 80% of the time, significantly greater than the 60% random chance for a lower S&P close within the next two days in the same time frame.

Categories : Archived Intraday Commentary, Intraday Commentary

 Print This Post