Institutions Better Buyers on Friday for First Time in Eight Days

Last week the S&P500 declined not only on the FOMC announcement day but the following day as well, contrary to historical precedent. I looked back at each instance since 1990 when this type of unexpected move occurred but did not find a bearish edge going forward. Out of 19 occurrences, only 1 led to an S&P down more than 0.2% three sessions later. ..

S&P500 Down on Fed Day & Following Day
06/24/10… S&P500 ??? three sessions later
09/24/09… S&P500 +0.9% three sessions later
06/29/07… S&P500 +1.5% three sessions later
08/09/06… S&P500 +0.2% three sessions later
05/11/06… S&P500 -1.1% three sessions later (*)
09/21/05… S&P500 +0.5% three sessions later
12/10/03… S&P500 +0.9% three sessions later
03/21/01… S&P500 +2.7% three sessions later
12/20/00… S&P500 +4.0% three sessions later
03/31/99… S&P500 +2.5% three sessions later
08/21/96… S&P500 -0.2% three sessions later
07/05/96… S&P500 -0.2% three sessions later
09/27/95… S&P500 +0.1% three sessions later
03/24/93… S&P500 +0.6% three sessions later
12/23/92… S&P500 -0.2% three sessions later
10/07/92… S&P500 +0.8% three sessions later
02/06/92… S&P500 -0.0% three sessions later
05/15/91… S&P500 +1.0% three sessions later
08/22/90… S&P500 +1.5% three sessions later
05/16/90… S&P500 +1.1% three sessions later

TICKscore closed at a solid +46 Friday as institutions were better buyers for the first time all week. Perhaps the details of the FinReg bill eased some concerns, we’ll see what kind of follow-through we see this week. We saw a nice jump in new 20-day highs, up over 50% from Thursday’s level, which tends to bode well for Monday’s session. In the last seven years I count only 16 instances in which 20-day highs jumped 25% or more from the previous day while S&P futures posted a lower high and lower low, most of which led to a higher S&P close one day later…

New 20-day Highs +25% From Previous Day, S&P Lower High & Low
06/25/10… S&P futures ??? next day
12/18/09… S&P futures +1.0% next day
05/15/09… S&P futures +2.7% next day
04/21/09… S&P futures -1.3% next day
01/23/09… S&P futures +0.9% next day
10/10/08… S&P futures +14.1% next day
09/29/08… S&P futures +4.3% next day
06/27/08… S&P futures +0.1% next day
05/21/08… S&P futures +0.0% next day
03/31/08… S&P futures +3.5% next day
03/27/08… S&P futures -0.8% next day
08/16/07… S&P futures +1.8% next day
10/10/05… S&P futures -0.1% next day
02/22/05… S&P futures +0.7% next day
08/13/04… S&P futures +1.1% next day
08/06/04… S&P futures +0.1% next day
12/10/03… S&P futures +1.1% next day

Most stocks performed much better than the major indices. Advancing issues more than doubled decliners on the NYSE, yet the Dow finished slightly lower. Since 1970, the Dow has closed lower on a 2:1+ positive breadth day only  sixteen times, thirteen of which led to a higher Dow close three sessions later…

NYSE Breadth 2:1 positive, Dow Industrials Down
06/25/10… Dow ??? three sessions later
06/24/09… Dow +2.8% three sessions later
01/19/07… Dow +0.5% three sessions later
06/30/06… Dow +0.7% three sessions later
10/21/04… Dow +0.2% three sessions later
05/24/04… Dow +2.5% three sessions later
06/28/02… Dow -2.0% three sessions later
03/31/00… Dow +1.0% three sessions later
12/31/98… Dow +4.0% three sessions later
06/28/96… Dow +0.9% three sessions later
02/28/94… Dow -0.2% three sessions later
04/16/87… Dow +0.4% three sessions later
01/16/85… Dow +2.5% three sessions later
08/10/84… Dow -1.6% three sessions later
08/18/82… Dow +7.4% three sessions later
04/23/80… Dow +2.1% three sessions later
07/15/74… Dow +0.3% three sessions later

The Dow wasn’t the only blue chip average to close lower. The S&P100 also finished with a fractional loss, keeping the OEX 2-day RSI in extreme oversold territory for a second session. In 27 out of the last 30 occurrences, or 90% of the time, the OEX posted a higher close (above the setup day’s close) within two days of a initial 2-day RSI reading under 2.0, suggesting we’ll see another rally attempt on Monday…

OEX 2-day RSI Closes Under 2.0
06/24/10… OEX ???
05/20/10… OEX +1.3% one session later
02/20/09… OEX +0.5% two sessions later
10/08/08… OEX -8.6% two sessions later (*)
01/22/08… OEX +2.2% one session later
01/04/08… OEX +0.3% one session later
02/27/07… OEX +0.6% one session later
02/12/07… OEX +0.7% one session later
06/13/06… OEX +0.6% one session later
06/24/05… OEX +0.7% two sessions later
03/22/05… OEX +0.1% one session later
01/04/05… OEX +0.1% two sessions later
03/10/04… OEX -0.5% two sessions later (*)
01/22/03… OEX +1.1% one session later
09/03/02… OEX +1.8% one session later
07/23/02… OEX +5.9% one session later
06/03/02… OEX +0.3% one session later
04/26/02… OEX +0.0% two sessions later
04/09/02… OEX +1.2% one session later
09/20/01… OEX +2.4% two sessions later
06/18/01… OEX +0.4% one session later
02/23/01… OEX +2.1% one session later
11/10/00… OEX +1.5% two sessions later
10/11/00… OEX +0.7% two sessions later
09/26/00… OEX +0.2% one session later
09/15/00… OEX -0.3% two sessions later (*)
04/14/00… OEX +4.2% one session later
01/24/00… OEX +1.1% one session later
01/04/00… OEX +0.3% one session later
08/04/99… OEX +1.0% one session later
07/26/99… OEX +1.2% one session later

End-of-day volume for the NYSE and NASDAQ jumped Friday on the Russell rebalancing, creating an interesting divergence. NYSE consolidated volume surged to 7.4 billion, up nearly 50% from Thursday’s level. NYSE floor volume clocked in at 2.55 billion, up over 100% from Thursday. When the percentage change in NYSE floor volume is more than 20% above the percentage change in consolidated volume, it’s paid to take notice of that day’s action in S&P futures. If the S&Ps closed below the open that day, it usually leads to lower prices over the short-term, while a close above the open has usually led to higher prices short-term. The reasoning escapes me, but the track record is pretty solid. The table below lists each of the last 30 occurrences, with a ‘buy’ designation given if S&P futures closed above the open that session and a ‘sell’ given if futures closed below the open…

(Floor Volume % Chg – Consolidated Volume % Chg) >20%
06/25/10… Buy SPX 1076… ???
06/18/10… Sell SPX 1117… Lower SPX three sessions later
03/19/10… Sell SPX 1159… No lower SPX close three-five sessions later (*)
02/12/10… Buy SPX 1075… Higher SPX three sessions later
01/29/10… Sell SPX 1073… Lower SPX four sessions later
01/15/10… Sell SPX 1136… Lower SPX three sessions later
12/18/09… Buy SPX 1102… Higher SPX three sessions later
09/30/09… Sell SPX 1057… Lower SPX three sessions later
09/18/09… Sell SPX 1068… Lower SPX three sessions later
08/31/09… Buy SPX 1020… Higher SPX five sessions later
08/21/09… Buy SPX 1026… Higher SPX three sessions later
08/14/09… Sell SPX 1004… Lower SPX three sessions later
07/06/09… Buy SPX 898… Higher SPX five sessions later
06/26/09… Buy SPX 918… Higher SPX three sessions later
06/19/09… Sell SPX 921… Lower SPX three sessions later
06/15/09… Sell SPX 923… Lower SPX three sessions later
05/29/09… Buy SPX 919… Higher SPX three sessions later
03/20/09… Sell SPX 768… No lower SPX close three-five sessions later (*)
12/19/08… Sell SPX 887… Lower SPX three sessions later
09/29/08… Sell SPX 1106… Lower SPX four sessions later
09/19/08… Sell SPX 1255… Lower SPX three sessions later
06/20/08… Sell SPX 1317… Lower SPX four sessions later
03/20/08… Buy SPX 1329… Higher SPX three sessions later
12/21/07… Buy SPX 1484… Higher SPX two sessions later (*)
09/21/07… Sell SPX 1525… Lower SPX three sessions later
07/16/07… Sell SPX 1549… Lower SPX four sessions later
07/03/07… Buy SPX 1524… Higher SPX three sessions later
06/22/07… Sell SPX 1502… Lower SPX two sessions later (*)
06/15/07… Sell SPX 1532… Lower SPX three sessions later
01/11/07… Buy SPX 1423… Higher SPX three sessions later
01/04/07… Buy SPX 1418… Higher SPX five sessions later

Out of 30 total occurrences since our database of consolidated volume began in 2007, 26 led to follow-through from the day of the elevated floor volume. When S&P futures settled below the open, 15 out of 18 occurrences led to a lower S&P close 3-5 trading days later. Similarly, when S&P futures settled above the open, 11 out of 12 occurrences led to a higher S&P close 3-5 trading days later. That combined 87% win rate is significantly above the 63% random chance for upside/downside follow-through in the 3-5 days after a close above/below the open, suggesting that when NYSE floor volume makes an unusually large leap relative to consolidated volume, that day’s move is likely to continue over the short-term.

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

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