S&P Futures Fill Friday’s Gap on Low Volume

The S&P wasn’t the only index to post a narrow range day Tuesday. The Nasdaq100 also held to a tight 15-point range despite 3:1 negative breadth, the smallest range day in three weeks. Similar to the S&P tendency noted in today’s intraday update, when the NDX posts an NR10 day along with 2:1+ negative breadth, it’s a short-term bullish sign. Out of 16 occurrences since 1990, 14 led to a higher NDX close three sessions later…

Nasdaq NR10 Day & 2:1 Negative Breadth
09/07/10… Nasdaq ??? three sessions later
08/13/10… Nasdaq +1.8% three sessions later
03/24/10… Nasdaq +0.5% three sessions later
11/10/09… Nasdaq +0.9% three sessions later
08/31/09… Nasdaq -1.2% three sessions later
03/27/09… Nasdaq +0.1% three sessions later
10/27/08… Nasdaq +14.0% three sessions later
05/23/08… Nasdaq +3.1% three sessions later
08/11/06… Nasdaq +5.6% three sessions later
07/21/06… Nasdaq +2.5% three sessions later
10/18/05… Nasdaq +1.7% three sessions later
05/10/04… Nasdaq +1.4% three sessions later
04/06/04… Nasdaq +0.2% three sessions later
12/13/02… Nasdaq +0.8% three sessions later
09/05/02… Nasdaq +7.3% three sessions later
08/03/98… Nasdaq -0.2% three sessions later
01/21/92… Nasdaq +5.3% three sessions later

Today’s light volume adds to the likelihood of higher prices in the Friday-Tuesday time frame. Despite lopsided market internals, SPY volume came in at its lowest level in over two weeks. This combination has only occurred 19 times since SPY began trading, 15 of which led to a higher SPY close four sessions later…

SPY Volume at Two-Week Low, NYSE Breadth 2:1 Negative
07/28/10… SPY +1.3% four sessions later
11/12/09… SPY +2.1% four sessions later
04/06/09… SPY +2.7% four sessions later
03/27/09… SPY +2.2% four sessions later
03/24/09… SPY -2.3% four sessions later
12/22/08… SPY -0.2% four sessions later
12/15/08… SPY +0.5% four sessions later
09/22/08… SPY -0.4% four sessions later
08/18/08… SPY +1.0% four sessions later
07/28/08… SPY +2.0% four sessions later
09/17/07… SPY +2.6% four sessions later
08/27/07… SPY +0.4% four sessions later
10/27/05… SPY +3.1% four sessions later
02/12/03… SPY +3.8% four sessions later
11/11/02… SPY +3.6% four sessions later
10/07/02… SPY +6.4% four sessions later
08/10/98… SPY -2.2% four sessions later
07/22/96… SPY +0.3% four sessions later
03/10/94… SPY +1.4% four sessions later

While the narrow range day on light volume tilts the odds in favor of a higher market early next week, we’ll most likely see a bit more pressure in the near-term. S&P futures sold off late in Tuesday’s session to fill the upside gap created last Friday. When an upside gap is filled the very next session, it’s a short-term negative sign and usually leads to a subsequently lower close. The last thirty occurrences are listed in the table below. Note that in 27 cases stretching back to 1998, or 90% of the time, S&P futures posted a subsequently lower close within the next four sessions, significantly above the 70% random odds of a close below today’s settlement within four sessions…

S&P Futures Immediately Fill an Upside Gap
09/07/10… ???
04/30/10… Lower S&P close two sessions later
04/21/10… Lower S&P close four sessions later
12/15/09… Lower S&P close two sessions later
01/29/09… Lower S&P close one session later
11/05/08… Lower S&P close one session later
09/22/08… Lower S&P close one session later
09/09/08… Lower S&P close four sessions later
08/29/08… Lower S&P close one session later
08/25/08… No lower close within four sessions
09/20/07… Lower S&P close two sessions later
07/05/07… Lower S&P close three sessions later
08/03/06… Lower S&P close one session later
06/20/05… Lower S&P close three sessions later
10/05/04… Lower S&P close two sessions later
03/18/04… Lower S&P close one session later
07/15/03… Lower S&P close one session later
10/18/02… Lower S&P close four sessions later
10/12/01… Lower S&P close one session later
04/06/01… No lower close within four sessions
11/28/00… Lower S&P close one session later
03/06/00… Lower S&P close one session later
02/09/00… Lower S&P close two sessions later
01/18/00… Lower S&P close two sessions later
01/11/00… Lower S&P close one session later
10/25/99… Lower S&P close one session later
09/28/99… Lower S&P close one session later
11/30/98… Lower S&P close three sessions later
10/13/98… No lower close within four sessions
09/24/98… Lower S&P close one session later
08/13/98… Lower S&P close one session later

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

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