S&P Futures Hold Above Previous Day’s Close Three Days

When S&P futures don’t trade below the previous day’s settlement, you’ll normally see an expansion in new 20-day highs. That’s not likely to be the case today, as new 20-day highs currently number 1,200 vs. over 2,000 on Thursday. When today’s S&P low is greater than yesterday’s close and new short-term highs fail to expand, the market usually enters into a sideways-to-down trend over the next two sessions. The last thirty occurrences are listed below…

S&P Futures Low > Prev day’s close, New 20-day Highs Contract
07/07/10… S&P futures +1.3% two sessions later
05/03/10… S&P futures -2.9% two sessions later
02/01/10… S&P futures +0.9% two sessions later
12/24/09… S&P futures -0.0% two sessions later
12/22/09… S&P futures +0.8% two sessions later
08/25/09… S&P futures +0.3% two sessions later
05/08/09… S&P futures -1.9% two sessions later
03/04/09… S&P futures -2.9% two sessions later
12/02/08… S&P futures -0.2% two sessions later
11/07/08… S&P futures -4.6% two sessions later
10/13/08… S&P futures -11.2% two sessions later
09/30/08… S&P futures -3.7% two sessions later
05/30/08… S&P futures -1.6% two sessions later
12/24/07… S&P futures -1.1% two sessions later
11/27/07… S&P futures +3.2% two sessions later
11/23/07… S&P futures -1.1% two sessions later
09/13/07… S&P futures -0.6% two sessions later
08/13/07… S&P futures -2.8% two sessions later
05/25/07… S&P futures +1.1% two sessions later
02/28/07… S&P futures -1.6% two sessions later
11/16/06… S&P futures +0.0% two sessions later
09/01/06… S&P futures -0.8% two sessions later
06/20/06… S&P futures +0.3% two sessions later
05/02/06… S&P futures -0.1% two sessions later
02/08/06… S&P futures +0.0% two sessions later
01/23/06… S&P futures +0.1% two sessions later
08/25/05… S&P futures +0.1% two sessions later
08/09/05… S&P futures +0.3% two sessions later
07/01/05… S&P futures -0.1% two sessions later
03/01/05… S&P futures -0.0% two sessions later

While there’s not a significant edge in terms of whether the market is higher or lower two sessions later, note that the market’s average loss of 2.1% tripled the 0.7% average gain.

The weight of the evidence continues to point lower heading into early next week, so I’d continue to expect a selloff to develop in the Monday-Tuesday time frame. S&P futures are set to post a third consecutive session in which the day’s low is greater than the previous day’s close. That’s only happened 8 times since 1990, all of which led to a lower S&P close the following session. I would note, however, that if today’s gain sticks into the close it will trigger a bullish signal that would point to a close above today’s settlement in the Tuesday-Thursday time frame of next week. The reasoning is that when the S&P moves steadily higher in the three days prior to options expiration week, the S&P has a strong track record of continuing to push higher over the next 2-4 sessions. Here’s a look at each of the last 30 instances in which the S&P closed higher three consecutive days prior to options expiration week…

S&P Closes Higher Three Consecutive Days Heading into OpEx Week
07/09/10… S&P +1.6% two sessions later
01/08/10… S&P +0.1% three sessions later
12/11/09… S&P +0.1% two sessions later
10/09/09… S&P +0.2% two sessions later
03/13/09… S&P +2.9% two sessions later
09/12/08… S&P +0.3% five sessions later
09/14/07… S&P +2.4% two sessions later
07/13/07… S&P +0.0% four sessions later
11/11/05… S&P +0.7% four sessions later
08/08/03… S&P +1.3% two sessions later
03/14/03… S&P +4.0% two sessions later
08/09/02… S&P +1.2% three sessions later
07/14/00… S&P +0.0% one session later
11/12/99… S&P +1.7% two sessions later
04/09/99… S&P +0.1% two sessions later
06/13/97… S&P +0.1% two sessions later
11/08/96… S&P +0.0% three sessions later
09/13/96… S&P +0.4% two sessions later
05/10/96… S&P +2.1% two sessions later
02/09/96… S&P +0.6% two sessions later
10/13/95… S&P +0.4% two sessions later
09/08/95… S&P +0.7% two sessions later
05/12/95… S&P +0.5% two sessions later
03/10/95… S&P +0.7% two sessions later
07/10/92… S&P +0.7% two sessions later
07/13/90… S&P +0.1% two sessions later
05/11/90… S&P +0.7% two sessions later
07/14/89… S&P +1.2% three sessions later
05/12/89… S&P +0.5% two sessions later
01/13/89… S&P +0.9% three sessions later

Two noteworthy points from the table above… the S&P closed higher (above the setup day’s close) at some point during expiration week 100% of the time. And the S&P closed higher 2-4 days later in 28 out of the last 30 occurrences, or 93% of the time, significantly above the 70% random chance for a higher S&P 2-4 sessions later in the same time frame. This tells us that if the S&P finishes higher today, we’re most likely looking at an initial pullback early next week followed by another upside push.

Categories : Archived Intraday Commentary, Intraday Commentary

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