Thursday’s High a Short-term Pivotal Level
By
Rennie on Friday, July 9th, 2010 at 12:23 am
The market’s put on a fairly impressive show so far during this holiday-shortened week. The S&P500 posted a third consecutive higher close for the first time since early April, the second consecutive double-digit TICKscore reading since late May and it’s in the process of trying to recoup the entire 5% decline from the week before. That would be quite a feat. Out of 37 weeks since 1960 in which the S&P lost 5% or more, only three times did the S&P recoup that entire week’s loss the following week – 10/31/08, 11/28/08 and 03/13/09. Of those cases, the market flipped right back down 2 of those 3 times. The one time it didn’t led to a sustained rally. Another interesting point is that in all three of those cases, the market went far beyond just making back the previous week’s 5%+ decline. In each case that week’s gain exceeded 10%. So if that’s any guide, we’re either looking at a massive surge on Friday that sends the SPX well above 1100, or more likely we’ll see the S&P hold below 1076.
One pattern argues against an outsized move occurring Friday. The intraday low for SPY held above the HLCC pivot point for the second day in a row. This usually precedes a day of consolidation with little overall movement. Since 2007, we’ve seen 36 instances in which the SPY’s intraday range held above the day’s pivot two consecutive sessions. There’s a slightly positive bias to the market’s next-day performance, but probably the most interesting statistic from the table below is that in the majority of cases (27 out of 36), the SPY closed +/- 0.3% or less…
SPY Low > Pivot Two Consecutive Days
07/08/10… SPY ??? next session
06/15/10… SPY -0.1% next session
04/15/10… SPY -1.6% next session
04/12/10… SPY +0.1% next session
04/05/10… SPY +0.2% next session
03/17/10… SPY -0.1% next session
03/08/10… SPY +0.2% next session
03/02/10… SPY +0.1% next session
02/17/10… SPY +0.6% next session
12/22/09… SPY +0.2% next session
11/05/09… SPY +0.3% next session
10/06/09… SPY +0.3% next session
09/08/09… SPY +0.8% next session
08/21/09… SPY -0.0% next session
07/20/09… SPY +0.5% next session
07/17/09… SPY +1.1% next session
07/16/09… SPY +1.1% next session
07/15/09… SPY -0.2% next session
06/01/09… SPY +0.1% next session
03/11/09… SPY +3.9% next session
12/31/08… SPY +3.0% next session
04/02/08… SPY +0.3% next session
02/13/08… SPY -0.9% next session
12/24/07… SPY +0.2% next session
10/29/07… SPY -0.7% next session
09/27/07… SPY -0.3% next session
07/13/07… SPY -0.0% next session
07/03/07… SPY -0.1% next session
06/15/07… SPY -0.1% next session
06/01/07… SPY +0.0% next session
05/21/07… SPY -0.1% next session
05/07/07… SPY -0.1% next session
04/17/07… SPY +0.1% next session
03/22/07… SPY +0.2% next session
03/21/07… SPY -0.1% next session
03/08/07… SPY +0.0% next session
02/14/07… SPY +0.1% next session
Volatility (VXO) triggered a short-term sell signal Thursday as it closed down for a fifth day in a row and more than 15% below its 10-day moving average. That’s a good indication we’ll see an SPX close below 1070 within the next couple of sessions. The last 30 times this pattern was initially triggered are listed below…
VXO 15% Below 10-day Moving Average
07/08/10… ???
06/15/10… Lower S&P close one session later
06/02/10… Lower S&P close two sessions later
02/22/10… Lower S&P close one session later
02/19/10… Lower S&P close one session 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
12/22/08… Lower S&P close one session later
11/28/08… Lower S&P close one session later
11/26/08… Lower S&P close two sessions later
11/05/08… Lower S&P close one session later
11/04/08… Lower S&P close one session later
11/03/08… Lower S&P close two sessions later
10/21/08… Lower S&P close one session 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
12/26/07… Lower S&P close one session later
12/24/07… Lower S&P close two sessions later
12/21/07… Lower S&P close three sessions later
09/27/07… Lower S&P close one session later
09/26/07… No lower S&P close within three sessions
09/25/07… No lower S&P close within three sessions
09/24/07… Lower S&P close one session later
09/21/07… Lower S&P close one session later
09/20/07… Lower S&P close two sessions later
09/19/07… Lower S&P close one session later
09/18/07… Lower S&P close two sessions later
08/27/07… Lower S&P close one session later
08/24/07… Lower S&P close one session later
Note that in 26 out of the last 30 cases, or 87% of the time, the S&P posted a lower close (below the setup day’s close) within the next two sessions. In the same period of time, the random chance that the S&P will close below today’s settlement within the next two days is only 62%, so this is a significant edge over random.
With the S&P closing only 1 point below the day’s high, there’s one other short-term pattern to consider. Historically, when the S&P500 can post two consecutive higher highs immediately after a 90%+ up volume session, the second higher high is usually a short-term buy. The persistent strength in the days following a heavily lopsided session signals buyers aren’t backing down, and the S&P has a good track record (24/27 since 1970) of closing above the first day’s high either the same day or the next…
Buy the S&P on the Second Higher High after 90%+ Up Volume
Buy 06/14/10 @ 1092.25… S&P close +2.1% next day
Buy 05/12/10 @ 1170.48… S&P close +0.1% same day
Buy 03/09/10 @ 1141.05… S&P close +0.4% next day
Buy 02/18/10 @ 1101.03… S&P close +0.5% same day
Buy 11/11/09 @ 1096.42… S&P close +0.2% same day
Buy 08/25/09 @ 1035.82… S&P close -0.7% next day
Buy 07/15/09 @ 905.84… S&P close +3.0% same day
Buy 05/20/09 @ 916.39… S&P close -3.1% next day
Buy 03/25/09 @ 823.65… S&P close +1.1% next day
Buy 03/19/09 @ 803.04… S&P close -4.3% next day
Buy 03/16/09 @ 758.29… S&P close +2.6% next day
Buy 03/12/09 @ 731.92… S&P close +2.6% same day
Buy 01/02/09 @ 910.32… S&P close +2.4% same day
Buy 11/26/08 @ 868.94… S&P close +2.2% same day
Buy 11/30/07 @ 1473.81… S&P close +0.5% same day
Buy 08/31/07 @ 1468.43… S&P close +0.4% same day
Buy 08/21/07 @ 1451.75… S&P close +0.9% next day
Buy 03/08/07 @ 1401.16… S&P close +0.1% same day
Buy 07/03/06 @ 1276.30… S&P close +0.3% same day
Buy 04/20/06 @ 1310.39… S&P close +0.1% same day
Buy 03/19/03 @ 866.94… S&P close +0.8% same day
Buy 01/06/03 @ 911.25… S&P close +2.0% same day
Buy 07/31/02 @ 909.81… S&P close +0.2% same day
Buy 11/02/87 @ 254.04… S&P close +0.7% same day
Buy 01/07/87 @ 253.99… S&P close +0.5% same day
Buy 08/24/82 @ 116.09… S&P close +1.3% next day
Buy 05/29/70 @ 75.44… S&P close +1.5% same day
Thursday was the first higher high after Wednesday’s 90%+ up volume session, so a second higher high on Friday would trigger this signal and point to a close above SPX 1071 either Friday or Monday. Short-term traders may therefore want to treat Thursday’s high as a particularly key level. Volatility is pointing lower for stocks, but it’s usually paid to respect continued upside momentum after a big 90% up volume day.
Thursday’s High a Short-term Pivotal Level
By Rennie on Friday, July 9th, 2010 at 12:23 amThe market’s put on a fairly impressive show so far during this holiday-shortened week. The S&P500 posted a third consecutive higher close for the first time since early April, the second consecutive double-digit TICKscore reading since late May and it’s in the process of trying to recoup the entire 5% decline from the week before. That would be quite a feat. Out of 37 weeks since 1960 in which the S&P lost 5% or more, only three times did the S&P recoup that entire week’s loss the following week – 10/31/08, 11/28/08 and 03/13/09. Of those cases, the market flipped right back down 2 of those 3 times. The one time it didn’t led to a sustained rally. Another interesting point is that in all three of those cases, the market went far beyond just making back the previous week’s 5%+ decline. In each case that week’s gain exceeded 10%. So if that’s any guide, we’re either looking at a massive surge on Friday that sends the SPX well above 1100, or more likely we’ll see the S&P hold below 1076.
One pattern argues against an outsized move occurring Friday. The intraday low for SPY held above the HLCC pivot point for the second day in a row. This usually precedes a day of consolidation with little overall movement. Since 2007, we’ve seen 36 instances in which the SPY’s intraday range held above the day’s pivot two consecutive sessions. There’s a slightly positive bias to the market’s next-day performance, but probably the most interesting statistic from the table below is that in the majority of cases (27 out of 36), the SPY closed +/- 0.3% or less…
SPY Low > Pivot Two Consecutive Days
07/08/10… SPY ??? next session
06/15/10… SPY -0.1% next session
04/15/10… SPY -1.6% next session
04/12/10… SPY +0.1% next session
04/05/10… SPY +0.2% next session
03/17/10… SPY -0.1% next session
03/08/10… SPY +0.2% next session
03/02/10… SPY +0.1% next session
02/17/10… SPY +0.6% next session
12/22/09… SPY +0.2% next session
11/05/09… SPY +0.3% next session
10/06/09… SPY +0.3% next session
09/08/09… SPY +0.8% next session
08/21/09… SPY -0.0% next session
07/20/09… SPY +0.5% next session
07/17/09… SPY +1.1% next session
07/16/09… SPY +1.1% next session
07/15/09… SPY -0.2% next session
06/01/09… SPY +0.1% next session
03/11/09… SPY +3.9% next session
12/31/08… SPY +3.0% next session
04/02/08… SPY +0.3% next session
02/13/08… SPY -0.9% next session
12/24/07… SPY +0.2% next session
10/29/07… SPY -0.7% next session
09/27/07… SPY -0.3% next session
07/13/07… SPY -0.0% next session
07/03/07… SPY -0.1% next session
06/15/07… SPY -0.1% next session
06/01/07… SPY +0.0% next session
05/21/07… SPY -0.1% next session
05/07/07… SPY -0.1% next session
04/17/07… SPY +0.1% next session
03/22/07… SPY +0.2% next session
03/21/07… SPY -0.1% next session
03/08/07… SPY +0.0% next session
02/14/07… SPY +0.1% next session
Volatility (VXO) triggered a short-term sell signal Thursday as it closed down for a fifth day in a row and more than 15% below its 10-day moving average. That’s a good indication we’ll see an SPX close below 1070 within the next couple of sessions. The last 30 times this pattern was initially triggered are listed below…
VXO 15% Below 10-day Moving Average
07/08/10… ???
06/15/10… Lower S&P close one session later
06/02/10… Lower S&P close two sessions later
02/22/10… Lower S&P close one session later
02/19/10… Lower S&P close one session 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
12/22/08… Lower S&P close one session later
11/28/08… Lower S&P close one session later
11/26/08… Lower S&P close two sessions later
11/05/08… Lower S&P close one session later
11/04/08… Lower S&P close one session later
11/03/08… Lower S&P close two sessions later
10/21/08… Lower S&P close one session 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
12/26/07… Lower S&P close one session later
12/24/07… Lower S&P close two sessions later
12/21/07… Lower S&P close three sessions later
09/27/07… Lower S&P close one session later
09/26/07… No lower S&P close within three sessions
09/25/07… No lower S&P close within three sessions
09/24/07… Lower S&P close one session later
09/21/07… Lower S&P close one session later
09/20/07… Lower S&P close two sessions later
09/19/07… Lower S&P close one session later
09/18/07… Lower S&P close two sessions later
08/27/07… Lower S&P close one session later
08/24/07… Lower S&P close one session later
Note that in 26 out of the last 30 cases, or 87% of the time, the S&P posted a lower close (below the setup day’s close) within the next two sessions. In the same period of time, the random chance that the S&P will close below today’s settlement within the next two days is only 62%, so this is a significant edge over random.
With the S&P closing only 1 point below the day’s high, there’s one other short-term pattern to consider. Historically, when the S&P500 can post two consecutive higher highs immediately after a 90%+ up volume session, the second higher high is usually a short-term buy. The persistent strength in the days following a heavily lopsided session signals buyers aren’t backing down, and the S&P has a good track record (24/27 since 1970) of closing above the first day’s high either the same day or the next…
Buy the S&P on the Second Higher High after 90%+ Up Volume
Buy 06/14/10 @ 1092.25… S&P close +2.1% next day
Buy 05/12/10 @ 1170.48… S&P close +0.1% same day
Buy 03/09/10 @ 1141.05… S&P close +0.4% next day
Buy 02/18/10 @ 1101.03… S&P close +0.5% same day
Buy 11/11/09 @ 1096.42… S&P close +0.2% same day
Buy 08/25/09 @ 1035.82… S&P close -0.7% next day
Buy 07/15/09 @ 905.84… S&P close +3.0% same day
Buy 05/20/09 @ 916.39… S&P close -3.1% next day
Buy 03/25/09 @ 823.65… S&P close +1.1% next day
Buy 03/19/09 @ 803.04… S&P close -4.3% next day
Buy 03/16/09 @ 758.29… S&P close +2.6% next day
Buy 03/12/09 @ 731.92… S&P close +2.6% same day
Buy 01/02/09 @ 910.32… S&P close +2.4% same day
Buy 11/26/08 @ 868.94… S&P close +2.2% same day
Buy 11/30/07 @ 1473.81… S&P close +0.5% same day
Buy 08/31/07 @ 1468.43… S&P close +0.4% same day
Buy 08/21/07 @ 1451.75… S&P close +0.9% next day
Buy 03/08/07 @ 1401.16… S&P close +0.1% same day
Buy 07/03/06 @ 1276.30… S&P close +0.3% same day
Buy 04/20/06 @ 1310.39… S&P close +0.1% same day
Buy 03/19/03 @ 866.94… S&P close +0.8% same day
Buy 01/06/03 @ 911.25… S&P close +2.0% same day
Buy 07/31/02 @ 909.81… S&P close +0.2% same day
Buy 11/02/87 @ 254.04… S&P close +0.7% same day
Buy 01/07/87 @ 253.99… S&P close +0.5% same day
Buy 08/24/82 @ 116.09… S&P close +1.3% next day
Buy 05/29/70 @ 75.44… S&P close +1.5% same day
Thursday was the first higher high after Wednesday’s 90%+ up volume session, so a second higher high on Friday would trigger this signal and point to a close above SPX 1071 either Friday or Monday. Short-term traders may therefore want to treat Thursday’s high as a particularly key level. Volatility is pointing lower for stocks, but it’s usually paid to respect continued upside momentum after a big 90% up volume day.