When Volume Declines and the S&P500 Trades Lower
By
Rennie on Friday, May 14th, 2010 at 9:51 am
NYSE volume declined for the fifth consecutive session in the wake of last Thursday’s monster session. The S&P (cash) fell slightly in the Tuesday-Thursday time frame, triggering a bullish signal given the steadily declining volume. Each of the last thirty instances in which NYSE volume declined three consecutive sessions and the S&P500 closed below its three-day ago close are listed in the table below. Note that in 24 out of 30 cases, or 80% of the time, the S&P500 closed at a higher level one week later, significantly above the 55% at-any-time odds for a higher SPX five sessions later…
NYSE Volume Down Three, S&P500 Trades Lower
05/13/10… S&P500 ??? one week later
11/27/09… S&P500 +1.3% one week later
10/05/09… S&P500 +3.4% one week later
06/24/09… S&P500 +2.5% one week later
06/09/09… S&P500 -3.2% one week later
04/07/09… S&P500 +4.5% one week later
03/04/09… S&P500 +1.2% one week later
01/26/09… S&P500 -1.3% one week later
01/09/09… S&P500 -4.5% one week later
12/24/08… S&P500 +7.7% one week later
09/24/08… S&P500 -2.1% one week later
09/11/08… S&P500 -3.4% one week later
08/25/08… S&P500 +0.9% one week later
07/28/08… S&P500 +1.2% one week later
03/27/08… S&P500 +3.3% one week later
10/04/07… S&P500 +0.8% one week later
09/26/07… S&P500 +0.9% one week later
05/14/07… S&P500 +1.5% one week later
01/08/07… S&P500 +1.4% one week later
12/22/06… S&P500 +0.4% one week later
12/08/06… S&P500 +1.2% one week later
10/30/06… S&P500 +0.1% one week later
10/02/06… S&P500 +1.5% one week later
06/26/06… S&P500 +2.4% one week later
04/10/06… S&P500 +0.9% one week later
02/13/06… S&P500 +1.6% one week later
02/03/06… S&P500 +0.2% one week later
11/08/05… S&P500 +0.9% one week later
08/05/05… S&P500 +0.3% one week later
06/06/05… S&P500 +0.3% one week later
03/14/05… S&P500 -1.9% one week later
Recent performance has been uneven, with only 55% winners over the last 11 signals, one reason there’s probably no rush to act on this signal. Many volume-based signals have not been performing up to their historical standards, so it would be best to look for confirmation from other sources. However I would note the steady equity curve of this pattern stretching back to 1990. It’s not just in recent years that a low volume decline has been bullish – it’s been a consistently positive indication over the last 20 years.
When Volume Declines and the S&P500 Trades Lower
By Rennie on Friday, May 14th, 2010 at 9:51 amNYSE volume declined for the fifth consecutive session in the wake of last Thursday’s monster session. The S&P (cash) fell slightly in the Tuesday-Thursday time frame, triggering a bullish signal given the steadily declining volume. Each of the last thirty instances in which NYSE volume declined three consecutive sessions and the S&P500 closed below its three-day ago close are listed in the table below. Note that in 24 out of 30 cases, or 80% of the time, the S&P500 closed at a higher level one week later, significantly above the 55% at-any-time odds for a higher SPX five sessions later…
NYSE Volume Down Three, S&P500 Trades Lower
05/13/10… S&P500 ??? one week later
11/27/09… S&P500 +1.3% one week later
10/05/09… S&P500 +3.4% one week later
06/24/09… S&P500 +2.5% one week later
06/09/09… S&P500 -3.2% one week later
04/07/09… S&P500 +4.5% one week later
03/04/09… S&P500 +1.2% one week later
01/26/09… S&P500 -1.3% one week later
01/09/09… S&P500 -4.5% one week later
12/24/08… S&P500 +7.7% one week later
09/24/08… S&P500 -2.1% one week later
09/11/08… S&P500 -3.4% one week later
08/25/08… S&P500 +0.9% one week later
07/28/08… S&P500 +1.2% one week later
03/27/08… S&P500 +3.3% one week later
10/04/07… S&P500 +0.8% one week later
09/26/07… S&P500 +0.9% one week later
05/14/07… S&P500 +1.5% one week later
01/08/07… S&P500 +1.4% one week later
12/22/06… S&P500 +0.4% one week later
12/08/06… S&P500 +1.2% one week later
10/30/06… S&P500 +0.1% one week later
10/02/06… S&P500 +1.5% one week later
06/26/06… S&P500 +2.4% one week later
04/10/06… S&P500 +0.9% one week later
02/13/06… S&P500 +1.6% one week later
02/03/06… S&P500 +0.2% one week later
11/08/05… S&P500 +0.9% one week later
08/05/05… S&P500 +0.3% one week later
06/06/05… S&P500 +0.3% one week later
03/14/05… S&P500 -1.9% one week later
Recent performance has been uneven, with only 55% winners over the last 11 signals, one reason there’s probably no rush to act on this signal. Many volume-based signals have not been performing up to their historical standards, so it would be best to look for confirmation from other sources. However I would note the steady equity curve of this pattern stretching back to 1990. It’s not just in recent years that a low volume decline has been bullish – it’s been a consistently positive indication over the last 20 years.