OEX Outperforms SPX On Second Consecutive Down Day

Stocks continued to retreat Friday following the big three-day rally that created the unusual bar on the monthly S&P chart (which is looking a lot more normal after the Thursday-Friday selloff). Breadth closed 7:1 negative, sending the NYSE McClellan Oscillator back under -200. TICKscore closed at -50, reflecting another round of heavy institutional selling. Cumulative TICKscore has closed below its May 7th close, suggesting the S&P may follow. Cumulative TICK closed at -92,470, keeping the 20-day moving average trending lower.

S&P futures staged a late-day rally on Friday that almost led to a settlement above the day’s midpoint (came within 1 point). NDX futures did settle above the day’s midpoint. That’s not what you want to see on a solid down day if you’re looking for a bottom – see this April 16th post for details.

One potential bright spot was the outperformance of the OEX (S&P100) relative to the SPX (S&P500). Since 1985, there have only been 21 instances in which the OEX settled down 1%+ two consecutive days and outperformed the SPX on a percentage basis both days. In all but two cases the large cap outperformance led to a short-term bounce over the next 1-2 days…

OEX Down Over 1% Two Consecutive Days, Outperforms SPX
05/14/10… ???
06/16/09… Higher SPX close two sessions later
03/30/09… Higher SPX close one session later
01/30/09… Higher SPX close two sessions later
01/12/09… Higher SPX close one session later
11/20/08… Higher SPX close one session later
11/17/08… Higher SPX close one session later
11/11/08… Higher SPX close two sessions later
10/22/08… Higher SPX close one session later
10/10/08… Higher SPX close one session later
10/03/08… No higher SPX close next 1-2 sessions
09/23/08… Higher SPX close two sessions later
12/17/07… Higher SPX close one session later
08/15/07… Higher SPX close one session later
05/12/06… Higher SPX close one session later
01/22/03… Higher SPX close one session later
10/07/02… Higher SPX close one session later
09/27/90… Higher SPX close one session later
08/03/90… No higher SPX close next 1-2 sessions
11/10/87… Higher SPX close one session later
04/14/87… Higher SPX close one session later
09/12/86… Higher SPX close one session later

I would have liked that pattern more if S&P futures had settled in the lower quarter of Friday’s range rather than near the midpoint. Further weakness on Monday could prove to be a short-term buy, but again I’d like to see some confirmation from other indicators.

Large traders in E-mini S&P futures covered their shorts this past week and switched to a net long position. That’s a potentially positive longer-term indication if the trend persists given that large traders in ES have apparently morphed into trend followers since 2007. See long-term chart.

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

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