Cumulative Breadth Hits New All-time High
By
Rennie on Monday, July 26th, 2010 at 9:54 pm
The S&P traded above Friday’s high right at Monday’s open, triggering the short-term buy signal discussed over the weekend related to two higher highs after a 90% up volume day. Stocks remained well bid throughout Monday’s session, with heavy institutional buying for the third day in a row. New 52-week highs expanded while new lows contracted for the fifth day in a row as S&P futures posted another higher high and higher low. That triggers another 2-3 day buy signal similar to those triggered last Thursday and Friday (see last Thursday’s column). We saw more strong NYSE TICK action, with Cumulative TICK recording its the third consecutive close above the +50,000 mark. Since the elimination of the uptick rule in 2007, we’ve seen thirteen separate instances in which Cumulative TICK exceeded +50,000 three days in a row. In all but one case the S&P was flat-to-higher two sessions later…
Cumulative TICK >+50,000 Three Consecutive Sessions
07/26/10… S&P500 ??? two sessions later
03/09/10… S&P500 +0.9% two sessions later
03/02/10… S&P500 +0.4% two sessions later
02/18/10… S&P500 +0.1% two sessions later
01/11/10… S&P500 +0.1% two sessions later
09/16/09… S&P500 -0.0% two sessions later
09/08/09… S&P500 +1.8% two sessions later
08/03/09… S&P500 +0.0% two sessions later
07/27/09… S&P500 -0.7% two sessions later
07/15/09… S&P500 +0.8% two sessions later
06/26/09… S&P500 +0.1% two sessions later
04/02/09… S&P500 +0.1% two sessions later
01/02/09… S&P500 +0.3% two sessions later
10/31/08… S&P500 +3.8% two sessions later
Also interesting that Monday marked the third consecutive 3:1+ positive breadth session, a streak only matched four times since 1990 (and all post-2009). In each case the S&P was higher two sessions later (see my twitter feed for dates).
Note that the Cumulative Breadth line has pushed into new all-time highs after Monday’s lopsided positive breadth session. Cumulative Breadth has been consistently outperforming the S&P throughout the last few months. It staged a much more muted decline than the S&P back in May, barely made a new low back in early July and has now recouped that entire drop with today’s session. It’s too soon to say whether the S&P will follow suit.
New highs expanded while new lows contracted for an impressive fifth day in a row on both a short and longer-term time frame. There have only been four other cases since 1990 in which the total number of new 52-week highs expanded while new lows contracted five days in a row. In each case the S&P was higher one month later. The market has been firing on all cylinders since last Thursday’s close and there’s no reason to fight it. Participation is about as broad as it gets. Over 3,500 issues hit new 20-day highs, easily a record in the six-year database I have on this data. I count only six cases since 2004 in which new 20-day highs exceeded 2900, with 5 out of 6 leading to a higher S&P one month later.
The recent cluster of lopsided positive breadth days has sent our version of Standard & Poors Oscillator above the 7.0 level as of Monday’s close. Readings this high suggest an overbought market, but as I discussed on Sunday in reference to the high McClellan Oscillator, I’m not interested in looking for a short-term top when market internals are this strong. The cluster of big Cumulative TICK readings and lopsided positive breadth days along with the steady improvement in new high/low data trumps overbought conditions. Note that if the S&P is higher one week after a 7+ Oscillator reading, it’s been a reliable intermediate-term buy signal as an overbought market that stays overbought is very bullish. On Sunday I mentioned that if the S&P is higher one week after a +200 McClellan Oscillator, it’s a positive longer-term indication. Here’s a look at every instance since 1995 in which the SPX closed higher five days after a McClellan Oscillator over +200 (prior to ’95 we hardly ever saw a reading over +200)…
SPX Higher One Week after +200 McClellan
03/12/10… S&P500 +4.0% one month later
08/10/09… S&P500 +1.8% one month later
07/27/09… S&P500 +4.4% one month later
05/11/09… S&P500 +3.7% one month later
04/09/09… S&P500 +8.5% one month later
04/02/09… S&P500 +5.2% one month later
03/24/09… S&P500 +4.6% one month later
01/08/09… S&P500 -4.5% one month later (*)
12/10/08… S&P500 -1.0% one month later
07/30/08… S&P500 -0.2% one month later
06/02/04… S&P500 +0.4% one month later
11/06/98… S&P500 +4.1% one month later
10/26/98… S&P500 +10.8% one month later
05/12/97… S&P500 +3.3% one month later
09/02/82… S&P500 +1.4% one month later
To avoid duplicates, I overlooked any signal that occurred within a week of a previous occurrence. Note that out of fifteen signals, only one led to an S&P down over 1% one month later, while eleven led to an S&P up over 1%. For this to take effect this time around, the S&P would need to finish out this week above last Friday’s close at SPX 1102.
NYSE TICK only traded down to -825 at its lowest point of the day Monday, the highest intraday low since April. While an absence of large negative TICK readings is an obvious positive for the day, it also suggests buying power is spent for the very short-term. The result is usually a sideways trading range the following session, with below-average gains when they do occur. This tendency is magnified when the S&P closes at a three-week high on the same day, as was the case Monday. The last 30 times in which the NYSE TICK posted its highest low in 15 days and the SPX closed at a 15-day high are listed in the table below. While the chance for a higher or lower close the next day has been about 50/50, note that the S&P gained more than 0.5% the next day only once…
SPX 15-day High, NYSE TICK Highest Low in 15 Days
07/26/10… S&P500 ??? next day
06/15/10… S&P500 -0.1% next day
04/05/10… S&P500 +0.2% next day
03/05/10… S&P500 -0.0% next day
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
Cumulative Breadth Hits New All-time High
By Rennie on Monday, July 26th, 2010 at 9:54 pmThe S&P traded above Friday’s high right at Monday’s open, triggering the short-term buy signal discussed over the weekend related to two higher highs after a 90% up volume day. Stocks remained well bid throughout Monday’s session, with heavy institutional buying for the third day in a row. New 52-week highs expanded while new lows contracted for the fifth day in a row as S&P futures posted another higher high and higher low. That triggers another 2-3 day buy signal similar to those triggered last Thursday and Friday (see last Thursday’s column). We saw more strong NYSE TICK action, with Cumulative TICK recording its the third consecutive close above the +50,000 mark. Since the elimination of the uptick rule in 2007, we’ve seen thirteen separate instances in which Cumulative TICK exceeded +50,000 three days in a row. In all but one case the S&P was flat-to-higher two sessions later…
Cumulative TICK >+50,000 Three Consecutive Sessions
07/26/10… S&P500 ??? two sessions later
03/09/10… S&P500 +0.9% two sessions later
03/02/10… S&P500 +0.4% two sessions later
02/18/10… S&P500 +0.1% two sessions later
01/11/10… S&P500 +0.1% two sessions later
09/16/09… S&P500 -0.0% two sessions later
09/08/09… S&P500 +1.8% two sessions later
08/03/09… S&P500 +0.0% two sessions later
07/27/09… S&P500 -0.7% two sessions later
07/15/09… S&P500 +0.8% two sessions later
06/26/09… S&P500 +0.1% two sessions later
04/02/09… S&P500 +0.1% two sessions later
01/02/09… S&P500 +0.3% two sessions later
10/31/08… S&P500 +3.8% two sessions later
Also interesting that Monday marked the third consecutive 3:1+ positive breadth session, a streak only matched four times since 1990 (and all post-2009). In each case the S&P was higher two sessions later (see my twitter feed for dates).
Note that the Cumulative Breadth line has pushed into new all-time highs after Monday’s lopsided positive breadth session. Cumulative Breadth has been consistently outperforming the S&P throughout the last few months. It staged a much more muted decline than the S&P back in May, barely made a new low back in early July and has now recouped that entire drop with today’s session. It’s too soon to say whether the S&P will follow suit.
New highs expanded while new lows contracted for an impressive fifth day in a row on both a short and longer-term time frame. There have only been four other cases since 1990 in which the total number of new 52-week highs expanded while new lows contracted five days in a row. In each case the S&P was higher one month later. The market has been firing on all cylinders since last Thursday’s close and there’s no reason to fight it. Participation is about as broad as it gets. Over 3,500 issues hit new 20-day highs, easily a record in the six-year database I have on this data. I count only six cases since 2004 in which new 20-day highs exceeded 2900, with 5 out of 6 leading to a higher S&P one month later.
The recent cluster of lopsided positive breadth days has sent our version of Standard & Poors Oscillator above the 7.0 level as of Monday’s close. Readings this high suggest an overbought market, but as I discussed on Sunday in reference to the high McClellan Oscillator, I’m not interested in looking for a short-term top when market internals are this strong. The cluster of big Cumulative TICK readings and lopsided positive breadth days along with the steady improvement in new high/low data trumps overbought conditions. Note that if the S&P is higher one week after a 7+ Oscillator reading, it’s been a reliable intermediate-term buy signal as an overbought market that stays overbought is very bullish. On Sunday I mentioned that if the S&P is higher one week after a +200 McClellan Oscillator, it’s a positive longer-term indication. Here’s a look at every instance since 1995 in which the SPX closed higher five days after a McClellan Oscillator over +200 (prior to ’95 we hardly ever saw a reading over +200)…
SPX Higher One Week after +200 McClellan
03/12/10… S&P500 +4.0% one month later
08/10/09… S&P500 +1.8% one month later
07/27/09… S&P500 +4.4% one month later
05/11/09… S&P500 +3.7% one month later
04/09/09… S&P500 +8.5% one month later
04/02/09… S&P500 +5.2% one month later
03/24/09… S&P500 +4.6% one month later
01/08/09… S&P500 -4.5% one month later (*)
12/10/08… S&P500 -1.0% one month later
07/30/08… S&P500 -0.2% one month later
06/02/04… S&P500 +0.4% one month later
11/06/98… S&P500 +4.1% one month later
10/26/98… S&P500 +10.8% one month later
05/12/97… S&P500 +3.3% one month later
09/02/82… S&P500 +1.4% one month later
To avoid duplicates, I overlooked any signal that occurred within a week of a previous occurrence. Note that out of fifteen signals, only one led to an S&P down over 1% one month later, while eleven led to an S&P up over 1%. For this to take effect this time around, the S&P would need to finish out this week above last Friday’s close at SPX 1102.
NYSE TICK only traded down to -825 at its lowest point of the day Monday, the highest intraday low since April. While an absence of large negative TICK readings is an obvious positive for the day, it also suggests buying power is spent for the very short-term. The result is usually a sideways trading range the following session, with below-average gains when they do occur. This tendency is magnified when the S&P closes at a three-week high on the same day, as was the case Monday. The last 30 times in which the NYSE TICK posted its highest low in 15 days and the SPX closed at a 15-day high are listed in the table below. While the chance for a higher or lower close the next day has been about 50/50, note that the S&P gained more than 0.5% the next day only once…
SPX 15-day High, NYSE TICK Highest Low in 15 Days
07/26/10… S&P500 ??? next day
06/15/10… S&P500 -0.1% next day
04/05/10… S&P500 +0.2% next day
03/05/10… S&P500 -0.0% next day
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