S&P Futures Settle Below Midpoint Despite 6:1 Positive Breadth
By
Rennie on Wednesday, July 14th, 2010 at 3:09 am
After strong institutional participation in the Wednesday-Friday time frame of last week, we’ve seen a significant reduction this week despite the market’s steady gains. TICKscore closed in negative territory for the second day in a row at -3, Cumulative TICK was essentially flat at +1,400. Higher prices have not motivated further buying. This trend was particularly evident on Tuesday as S&P futures settled below the day’s midpoint. That’s a sign of weakness coming on a 6:1 positive breadth day. Looking for similar sessions, I found only twelve days since 1990 in which the market traded similarly, all of which were in the last few years. In most cases, the relatively weak close in spite of the lopsided positive breadth usually led to a flat-to-down day the next session. Only once did the S&Ps close up more than 0.5%, which is noteworthy given that futures are up more than that in overnight trade…
S&P Futures Close <Midpoint on 3:1 Positive Breadth
07/13/10… S&P futures ??? next day
02/09/10… S&P futures -0.3% next day
11/23/09… S&P futures -0.1% next day
10/06/09… S&P futures +0.5% next day
08/07/09… S&P futures +0.1% next day
07/30/09… S&P futures +0.2% next day
03/31/09… S&P futures +1.8% next day (*)
03/04/09… S&P futures -3.2% next day
01/06/09… S&P futures -2.7% next day
12/08/08… S&P futures -1.7% next day
09/19/08… S&P futures -2.6% next day
04/18/08… S&P futures +0.0% next day
06/15/07… S&P futures -0.1% next day
VXO triggered a short-term sell after it closed more than 15% below its 10-day moving average. The track record I showed most recently for this pattern in my July 9th column was every instance of a VXO 15%+ below its 10-day average. That’s not as effective as considering only initial signals – that is, when the signal was not in effect the prior session. By disregarding more than one signal until the spread ‘resets’ by coming in under 15%, we get a better idea of the setup’s overall performance under different market conditions. The record now spans over twice as long and accuracy is improved, with 90% of the last 30 signals leading to a lower S&P close (below the setup day’s close) within the next three sessions.
VXO 15%+ Below its 10-day Average
07/13/10… ???
07/08/10… No lower close within next 3 sessions
06/15/10… Lower S&P close one session later
06/02/10… Lower S&P close two sessions later
02/18/10… Lower S&P close three sessions later
01/28/09… Lower S&P close one session later
12/19/08… Lower S&P close one session later
11/26/08… Lower S&P close two sessions later
11/03/08… Lower S&P close two sessions later
10/20/08… Lower S&P close one session later
07/22/08… Lower S&P close two sessions later
05/19/08… Lower S&P close one session later
12/21/07… Lower S&P close three sessions later
09/18/07… Lower S&P close two sessions later
08/22/07… Lower S&P close one session later
03/21/07… Lower S&P close one session later
03/12/07… Lower S&P close one session later
08/18/06… Lower S&P close one session later
07/25/06… Lower S&P close one session later
07/03/06… Lower S&P close one session later
06/29/06… Lower S&P close one session later
06/21/06… Lower S&P close one session later
06/15/06… Lower S&P close one session later
05/23/05… Lower S&P close two sessions later
05/27/04… Lower S&P close one session later
05/25/04… No lower close within next 3 sessions
04/05/04… Lower S&P close one session later
03/29/04… No lower close within next 3 sessions
11/21/02… Lower S&P close one session later
08/15/02… Lower S&P close one session later
07/29/02… Lower S&P close three sessions later
SPX 2-day RSI came in at a high 99.1 Tuesday. Over the past decade, readings over 98 have been a good indication of limited upside potential until the 2-day RSI closes back under 98. We’ve seen the SPX 2-day RSI cross the 98 threshold a total of 29 times since 2000, 22 of which led to a lower S&P close by the time the 2-day RSI closed back under 98. Only one case led to an S&P up 1%+ when the signal was closed out, always within three days. Virtually any down day for SPX would send the 2-day under 98, so what this really indicates is that we’re likely to see a down day within the next few sessions and that until we do, upside potential is probably capped in the 1% range.
S&P500 2-Day RSI Closes Over 98
07/13/10… S&P500 ??? when RSI <98
04/14/10… S&P500 -1.5% when RSI <98 (two days)
03/16/10… S&P500 +0.6% when RSI <98 (two days)
03/09/10… S&P500 +0.8% when RSI <98 (three days)
03/05/10… S&P500 -0.0% when RSI <98 (one day)
11/11/09… S&P500 -1.0% when RSI <98 (one day)
11/09/09… S&P500 -0.0% when RSI <98 (one day)
09/16/09… S&P500 -0.3% when RSI <98 (one day)
07/23/09… S&P500 +0.3% when RSI <98 (three days)
07/20/09… S&P500 +0.3% when RSI <98 (two days)
07/16/09… S&P500 -0.0% when RSI <98 (one day)
05/04/09… S&P500 -0.4% when RSI <98 (one day)
01/02/09… S&P500 -0.5% when RSI <98 (one day)
04/10/07… S&P500 -0.7% when RSI <98 (one day)
10/26/06… S&P500 -0.4% when RSI <98 (two days)
03/17/06… S&P500 -0.2% when RSI <98 (one day)
11/22/05… S&P500 -0.3% when RSI <98 (three days)
09/30/05… S&P500 -0.2% when RSI <98 (one day)
07/15/05… S&P500 -0.6% when RSI <98 (one day)
06/17/05… S&P500 -0.1% when RSI <98 (one day)
11/03/04… S&P500 +1.9% when RSI <98 (three days)
05/25/04… S&P500 +0.7% when RSI <98 (three days)
04/05/04… S&P500 -0.2% when RSI <98 (one day)
09/02/03… S&P500 -0.1% when RSI <98 (three days)
06/04/03… S&P500 +0.2% when RSI <98 (two days)
03/19/03… S&P500 -1.0% when RSI <98 (three days)
05/21/01… S&P500 -0.3% when RSI <98 (one day)
04/19/01… S&P500 -0.9% when RSI <98 (one day)
08/08/00… S&P500 -0.7% when RSI <98 (one day)
07/14/00… S&P500 -1.1% when RSI <98 (two days)
12/31/99… S&P500 -1.0% when RSI <98 (one day)
12/23/99… S&P500 -0.1% when RSI <98 (one day)
07/02/99… S&P500 -0.2% when RSI <98 (one day)
04/12/99… S&P500 -0.7% when RSI <98 (one day)
S&P futures posted a sixth consecutive session of higher highs Tuesday. In 26 out of the last 30 occurrences of ‘six higher highs’, or 87% of the time, the S&Ps closed lower 2-4 sessions later. That’s significantly greater than the 64% random chance for a lower S&P 2-4 days later.
Six Higher Highs for S&P Futures
07/13/10… ???
06/16/10… Lower S&P close four sessions later
03/12/10… No lower S&P close 2-4 sessions later
02/19/10… Lower S&P close two sessions later
01/08/10… Lower S&P close two sessions later
12/29/09… Lower S&P close two sessions later
11/11/09… Lower S&P close two sessions later
09/11/09… No lower S&P close 2-4 sessions later
08/25/09… Lower S&P close four sessions later
07/27/09… Lower S&P close two sessions later
07/01/09… Lower S&P close two sessions later
03/17/09… Lower S&P close three sessions later
05/19/08… Lower S&P close four sessions later
07/05/07… Lower S&P close three sessions later
03/15/06… Lower S&P close four sessions later
06/17/05… Lower S&P close four sessions later
05/23/05… Lower S&P close two sessions later
12/16/04… Lower S&P close two sessions later
11/02/04… No lower S&P close 2-4 sessions later
04/01/04… No lower S&P close 2-4 sessions later
01/22/04… Lower S&P close three sessions later
01/08/04… Lower S&P close two sessions later
12/02/03… Lower S&P close three sessions later
05/16/03… Lower S&P close two sessions later
03/20/03… Lower S&P close two sessions later
07/31/02… Lower S&P close two sessions later
03/08/02… Lower S&P close three sessions later
02/14/02… Lower S&P close two sessions later
11/07/01… Lower S&P close three sessions later
08/08/00… Lower S&P close two sessions later
07/14/00… Lower S&P close four sessions later
Putting a positive spin on the recent weak TICK action, it’s noteworthy that Tuesday marked the second day that the S&P posted a higher high and higher close despite the NYSE TICK posting a lower high both days. When the market has managed to rally without new TICK highs, it’s often continued higher. Over the last 30 occurrences, the S&P posted a higher close (above the setup day’s close) 2-3 sessions later 90% of the time…
S&P Futures Higher High & Close, NYSE TICK Lower High Two Days
07/13/10… ???
06/03/10… No higher S&P close next 2-3 sessions
02/17/10… Higher S&P close two sessions later
02/16/10… Higher S&P close two sessions later
01/06/10… Higher S&P close two sessions later
12/22/09… Higher S&P close two sessions later
12/11/09… Higher S&P close two sessions later
11/10/09… Higher S&P close three sessions later
11/09/09… Higher S&P close two sessions later
10/12/09… Higher S&P close two sessions later
07/27/09… Higher S&P close three sessions later
06/10/09… Higher S&P close two sessions later
11/30/07… Higher S&P close three sessions later
09/27/07… Higher S&P close two sessions later
09/13/07… Higher S&P close three sessions later
09/12/07… Higher S&P close two sessions later
08/22/07… Higher S&P close two sessions later
06/14/07… Higher S&P close two sessions later
05/07/07… Higher S&P close two sessions later
05/04/07… Higher S&P close two sessions later
04/16/07… Higher S&P close two sessions later
03/20/07… Higher S&P close two sessions later
02/15/07… Higher S&P close two sessions later
02/02/07… Higher S&P close three sessions later
12/05/06… No higher close 2-3 sessions later
10/24/06… Higher S&P close two sessions later
08/17/06… Higher S&P close two sessions later
02/16/06… Higher S&P close three sessions later
01/27/06… No higher close 2-3 sessions later
01/05/06… Higher S&P close two sessions later
11/03/05… Higher S&P close two sessions later
S&P Futures Settle Below Midpoint Despite 6:1 Positive Breadth
By Rennie on Wednesday, July 14th, 2010 at 3:09 amAfter strong institutional participation in the Wednesday-Friday time frame of last week, we’ve seen a significant reduction this week despite the market’s steady gains. TICKscore closed in negative territory for the second day in a row at -3, Cumulative TICK was essentially flat at +1,400. Higher prices have not motivated further buying. This trend was particularly evident on Tuesday as S&P futures settled below the day’s midpoint. That’s a sign of weakness coming on a 6:1 positive breadth day. Looking for similar sessions, I found only twelve days since 1990 in which the market traded similarly, all of which were in the last few years. In most cases, the relatively weak close in spite of the lopsided positive breadth usually led to a flat-to-down day the next session. Only once did the S&Ps close up more than 0.5%, which is noteworthy given that futures are up more than that in overnight trade…
S&P Futures Close <Midpoint on 3:1 Positive Breadth
07/13/10… S&P futures ??? next day
02/09/10… S&P futures -0.3% next day
11/23/09… S&P futures -0.1% next day
10/06/09… S&P futures +0.5% next day
08/07/09… S&P futures +0.1% next day
07/30/09… S&P futures +0.2% next day
03/31/09… S&P futures +1.8% next day (*)
03/04/09… S&P futures -3.2% next day
01/06/09… S&P futures -2.7% next day
12/08/08… S&P futures -1.7% next day
09/19/08… S&P futures -2.6% next day
04/18/08… S&P futures +0.0% next day
06/15/07… S&P futures -0.1% next day
VXO triggered a short-term sell after it closed more than 15% below its 10-day moving average. The track record I showed most recently for this pattern in my July 9th column was every instance of a VXO 15%+ below its 10-day average. That’s not as effective as considering only initial signals – that is, when the signal was not in effect the prior session. By disregarding more than one signal until the spread ‘resets’ by coming in under 15%, we get a better idea of the setup’s overall performance under different market conditions. The record now spans over twice as long and accuracy is improved, with 90% of the last 30 signals leading to a lower S&P close (below the setup day’s close) within the next three sessions.
VXO 15%+ Below its 10-day Average
07/13/10… ???
07/08/10… No lower close within next 3 sessions
06/15/10… Lower S&P close one session later
06/02/10… Lower S&P close two sessions later
02/18/10… Lower S&P close three sessions later
01/28/09… Lower S&P close one session later
12/19/08… Lower S&P close one session later
11/26/08… Lower S&P close two sessions later
11/03/08… Lower S&P close two sessions later
10/20/08… Lower S&P close one session later
07/22/08… Lower S&P close two sessions later
05/19/08… Lower S&P close one session later
12/21/07… Lower S&P close three sessions later
09/18/07… Lower S&P close two sessions later
08/22/07… Lower S&P close one session later
03/21/07… Lower S&P close one session later
03/12/07… Lower S&P close one session later
08/18/06… Lower S&P close one session later
07/25/06… Lower S&P close one session later
07/03/06… Lower S&P close one session later
06/29/06… Lower S&P close one session later
06/21/06… Lower S&P close one session later
06/15/06… Lower S&P close one session later
05/23/05… Lower S&P close two sessions later
05/27/04… Lower S&P close one session later
05/25/04… No lower close within next 3 sessions
04/05/04… Lower S&P close one session later
03/29/04… No lower close within next 3 sessions
11/21/02… Lower S&P close one session later
08/15/02… Lower S&P close one session later
07/29/02… Lower S&P close three sessions later
SPX 2-day RSI came in at a high 99.1 Tuesday. Over the past decade, readings over 98 have been a good indication of limited upside potential until the 2-day RSI closes back under 98. We’ve seen the SPX 2-day RSI cross the 98 threshold a total of 29 times since 2000, 22 of which led to a lower S&P close by the time the 2-day RSI closed back under 98. Only one case led to an S&P up 1%+ when the signal was closed out, always within three days. Virtually any down day for SPX would send the 2-day under 98, so what this really indicates is that we’re likely to see a down day within the next few sessions and that until we do, upside potential is probably capped in the 1% range.
S&P500 2-Day RSI Closes Over 98
07/13/10… S&P500 ??? when RSI <98
04/14/10… S&P500 -1.5% when RSI <98 (two days)
03/16/10… S&P500 +0.6% when RSI <98 (two days)
03/09/10… S&P500 +0.8% when RSI <98 (three days)
03/05/10… S&P500 -0.0% when RSI <98 (one day)
11/11/09… S&P500 -1.0% when RSI <98 (one day)
11/09/09… S&P500 -0.0% when RSI <98 (one day)
09/16/09… S&P500 -0.3% when RSI <98 (one day)
07/23/09… S&P500 +0.3% when RSI <98 (three days)
07/20/09… S&P500 +0.3% when RSI <98 (two days)
07/16/09… S&P500 -0.0% when RSI <98 (one day)
05/04/09… S&P500 -0.4% when RSI <98 (one day)
01/02/09… S&P500 -0.5% when RSI <98 (one day)
04/10/07… S&P500 -0.7% when RSI <98 (one day)
10/26/06… S&P500 -0.4% when RSI <98 (two days)
03/17/06… S&P500 -0.2% when RSI <98 (one day)
11/22/05… S&P500 -0.3% when RSI <98 (three days)
09/30/05… S&P500 -0.2% when RSI <98 (one day)
07/15/05… S&P500 -0.6% when RSI <98 (one day)
06/17/05… S&P500 -0.1% when RSI <98 (one day)
11/03/04… S&P500 +1.9% when RSI <98 (three days)
05/25/04… S&P500 +0.7% when RSI <98 (three days)
04/05/04… S&P500 -0.2% when RSI <98 (one day)
09/02/03… S&P500 -0.1% when RSI <98 (three days)
06/04/03… S&P500 +0.2% when RSI <98 (two days)
03/19/03… S&P500 -1.0% when RSI <98 (three days)
05/21/01… S&P500 -0.3% when RSI <98 (one day)
04/19/01… S&P500 -0.9% when RSI <98 (one day)
08/08/00… S&P500 -0.7% when RSI <98 (one day)
07/14/00… S&P500 -1.1% when RSI <98 (two days)
12/31/99… S&P500 -1.0% when RSI <98 (one day)
12/23/99… S&P500 -0.1% when RSI <98 (one day)
07/02/99… S&P500 -0.2% when RSI <98 (one day)
04/12/99… S&P500 -0.7% when RSI <98 (one day)
S&P futures posted a sixth consecutive session of higher highs Tuesday. In 26 out of the last 30 occurrences of ‘six higher highs’, or 87% of the time, the S&Ps closed lower 2-4 sessions later. That’s significantly greater than the 64% random chance for a lower S&P 2-4 days later.
Six Higher Highs for S&P Futures
07/13/10… ???
06/16/10… Lower S&P close four sessions later
03/12/10… No lower S&P close 2-4 sessions later
02/19/10… Lower S&P close two sessions later
01/08/10… Lower S&P close two sessions later
12/29/09… Lower S&P close two sessions later
11/11/09… Lower S&P close two sessions later
09/11/09… No lower S&P close 2-4 sessions later
08/25/09… Lower S&P close four sessions later
07/27/09… Lower S&P close two sessions later
07/01/09… Lower S&P close two sessions later
03/17/09… Lower S&P close three sessions later
05/19/08… Lower S&P close four sessions later
07/05/07… Lower S&P close three sessions later
03/15/06… Lower S&P close four sessions later
06/17/05… Lower S&P close four sessions later
05/23/05… Lower S&P close two sessions later
12/16/04… Lower S&P close two sessions later
11/02/04… No lower S&P close 2-4 sessions later
04/01/04… No lower S&P close 2-4 sessions later
01/22/04… Lower S&P close three sessions later
01/08/04… Lower S&P close two sessions later
12/02/03… Lower S&P close three sessions later
05/16/03… Lower S&P close two sessions later
03/20/03… Lower S&P close two sessions later
07/31/02… Lower S&P close two sessions later
03/08/02… Lower S&P close three sessions later
02/14/02… Lower S&P close two sessions later
11/07/01… Lower S&P close three sessions later
08/08/00… Lower S&P close two sessions later
07/14/00… Lower S&P close four sessions later
Putting a positive spin on the recent weak TICK action, it’s noteworthy that Tuesday marked the second day that the S&P posted a higher high and higher close despite the NYSE TICK posting a lower high both days. When the market has managed to rally without new TICK highs, it’s often continued higher. Over the last 30 occurrences, the S&P posted a higher close (above the setup day’s close) 2-3 sessions later 90% of the time…
S&P Futures Higher High & Close, NYSE TICK Lower High Two Days
07/13/10… ???
06/03/10… No higher S&P close next 2-3 sessions
02/17/10… Higher S&P close two sessions later
02/16/10… Higher S&P close two sessions later
01/06/10… Higher S&P close two sessions later
12/22/09… Higher S&P close two sessions later
12/11/09… Higher S&P close two sessions later
11/10/09… Higher S&P close three sessions later
11/09/09… Higher S&P close two sessions later
10/12/09… Higher S&P close two sessions later
07/27/09… Higher S&P close three sessions later
06/10/09… Higher S&P close two sessions later
11/30/07… Higher S&P close three sessions later
09/27/07… Higher S&P close two sessions later
09/13/07… Higher S&P close three sessions later
09/12/07… Higher S&P close two sessions later
08/22/07… Higher S&P close two sessions later
06/14/07… Higher S&P close two sessions later
05/07/07… Higher S&P close two sessions later
05/04/07… Higher S&P close two sessions later
04/16/07… Higher S&P close two sessions later
03/20/07… Higher S&P close two sessions later
02/15/07… Higher S&P close two sessions later
02/02/07… Higher S&P close three sessions later
12/05/06… No higher close 2-3 sessions later
10/24/06… Higher S&P close two sessions later
08/17/06… Higher S&P close two sessions later
02/16/06… Higher S&P close three sessions later
01/27/06… No higher close 2-3 sessions later
01/05/06… Higher S&P close two sessions later
11/03/05… Higher S&P close two sessions later