What’s Unusual about Monday’s Unfilled Upside Gap
By
Rennie on Monday, October 25th, 2010 at 9:42 pm
S&P futures posted an unfilled upside gap (low > previous day’s high) on Monday but closed below the open, a very rare development. Consider that there have been 67 unfilled upside gaps on a Monday since inception of the S&P futures contract. In 60 of those 67 cases the S&P settled above the open. The 7 cases in which it failed to close above the open are listed below, along with the S&P’s performance over the remainder of the week…
Unfilled Upside Gap on Monday, Close < Open
10/25/10… S&P futures ??? four sessions later
09/08/08… S&P futures -0.8% four sessions later
10/04/04… S&P futures -1.2% four sessions later
07/14/03… S&P futures -1.2% four sessions later
11/04/02… S&P futures -1.8% four sessions later
11/27/00… S&P futures -2.8% four sessions later
09/27/99… S&P futures -0.2% four sessions later
10/12/98… S&P futures +6.1% four sessions later
Breadth was fairly weak considering the unfilled gap, with the NYSE advance/decline ratio closing at 1.50. Typically upside gap days coincide with much more bullish breadth. When the advance/decline ratio has closed below 1.55 on a day when the S&P futures intraday low was greater than the previous day’s high, there’s a downside edge for the following session. The last thirty times this pattern has been triggered are listed below…
Upside Gap for S&P futures, NYSE Adv/Dec Ratio <1.55
10/25/10… S&P futures ??? next session
12/10/09… S&P futures +0.6% next session
10/04/04… S&P futures +0.1% next session
04/02/04… S&P futures +0.5% next session
07/14/03… S&P futures -0.2% next session
11/04/02… S&P futures +0.7% next session
11/27/00… S&P futures -1.5% next session
03/03/00… S&P futures -1.1% next session
02/08/00… S&P futures -1.9% next session
01/14/00… S&P futures -0.6% next session
01/10/00… S&P futures -1.4% next session
12/03/99… S&P futures -0.9% next session
10/04/99… S&P futures -0.2% next session
09/27/99… S&P futures -0.2% next session
08/23/99… S&P futures +0.3% next session
04/05/99… S&P futures -0.2% next session
11/27/98… S&P futures -2.7% next session
11/23/98… S&P futures -0.6% next session
11/05/96… S&P futures +2.0% next session
06/24/96… S&P futures -0.2% next session
10/30/95… S&P futures -0.5% next session
10/13/94… S&P futures +0.5% next session
01/14/94… S&P futures -0.2% next session
10/15/93… S&P futures -0.2% next session
02/11/93… S&P futures -0.8% next session
06/12/92… S&P futures +0.2% next session
04/06/92… S&P futures -2.0% next session
01/19/90… S&P futures -3.2% next session
06/22/87… S&P futures -0.6% next session
03/05/87… S&P futures +0.4% next session
02/28/85… S&P futures -0.9% next session
In 21 out of the last 30 occurrences, or 70% of the time, S&P futures settled lower the following session, significantly above the 46% random chance for a lower S&P close one day later in the same time frame. In only three cases did the S&P rally more than 0.5% the next day, while it fell more than 0.5% thirteen times.
Looking beyond tomorrow, I’m still seeing signs that the market put in a momentum top back on October 13th…
New 52-week highs on the NYSE and NASDAQ as well as new 20-day highs across all exchanges remains below the level hit on 10/13 even as the SPX ran up to just under 1200.
One of the new additions to the End-of-Day charting section is Up & Down Volume utilizing only the 500 SPX components. Notice from the chart that the cumulative version of SPX up – down volume (black line) put in a top on 10/13 that continues to hold.
NYSE TICK action remains decidedly negative. The 20-day moving average of Cumulative TICK is back in a downtrend, as is Adjusted TICK, while cumulative TICKscore also continues to trend steadily lower. At some point (soon?) the lack of institutional support will most likely undermine this rally. I see from the latest COT data that large traders in ES futures are heavily short. While they can be early, this normally contra-trend group has been consistently on the right side of the market since 2006. I would be surprised if they’re not ultimately proved correct this time around as well.
What’s Unusual about Monday’s Unfilled Upside Gap
By Rennie on Monday, October 25th, 2010 at 9:42 pmS&P futures posted an unfilled upside gap (low > previous day’s high) on Monday but closed below the open, a very rare development. Consider that there have been 67 unfilled upside gaps on a Monday since inception of the S&P futures contract. In 60 of those 67 cases the S&P settled above the open. The 7 cases in which it failed to close above the open are listed below, along with the S&P’s performance over the remainder of the week…
Unfilled Upside Gap on Monday, Close < Open
10/25/10… S&P futures ??? four sessions later
09/08/08… S&P futures -0.8% four sessions later
10/04/04… S&P futures -1.2% four sessions later
07/14/03… S&P futures -1.2% four sessions later
11/04/02… S&P futures -1.8% four sessions later
11/27/00… S&P futures -2.8% four sessions later
09/27/99… S&P futures -0.2% four sessions later
10/12/98… S&P futures +6.1% four sessions later
Breadth was fairly weak considering the unfilled gap, with the NYSE advance/decline ratio closing at 1.50. Typically upside gap days coincide with much more bullish breadth. When the advance/decline ratio has closed below 1.55 on a day when the S&P futures intraday low was greater than the previous day’s high, there’s a downside edge for the following session. The last thirty times this pattern has been triggered are listed below…
Upside Gap for S&P futures, NYSE Adv/Dec Ratio <1.55
10/25/10… S&P futures ??? next session
12/10/09… S&P futures +0.6% next session
10/04/04… S&P futures +0.1% next session
04/02/04… S&P futures +0.5% next session
07/14/03… S&P futures -0.2% next session
11/04/02… S&P futures +0.7% next session
11/27/00… S&P futures -1.5% next session
03/03/00… S&P futures -1.1% next session
02/08/00… S&P futures -1.9% next session
01/14/00… S&P futures -0.6% next session
01/10/00… S&P futures -1.4% next session
12/03/99… S&P futures -0.9% next session
10/04/99… S&P futures -0.2% next session
09/27/99… S&P futures -0.2% next session
08/23/99… S&P futures +0.3% next session
04/05/99… S&P futures -0.2% next session
11/27/98… S&P futures -2.7% next session
11/23/98… S&P futures -0.6% next session
11/05/96… S&P futures +2.0% next session
06/24/96… S&P futures -0.2% next session
10/30/95… S&P futures -0.5% next session
10/13/94… S&P futures +0.5% next session
01/14/94… S&P futures -0.2% next session
10/15/93… S&P futures -0.2% next session
02/11/93… S&P futures -0.8% next session
06/12/92… S&P futures +0.2% next session
04/06/92… S&P futures -2.0% next session
01/19/90… S&P futures -3.2% next session
06/22/87… S&P futures -0.6% next session
03/05/87… S&P futures +0.4% next session
02/28/85… S&P futures -0.9% next session
In 21 out of the last 30 occurrences, or 70% of the time, S&P futures settled lower the following session, significantly above the 46% random chance for a lower S&P close one day later in the same time frame. In only three cases did the S&P rally more than 0.5% the next day, while it fell more than 0.5% thirteen times.
Looking beyond tomorrow, I’m still seeing signs that the market put in a momentum top back on October 13th…
New 52-week highs on the NYSE and NASDAQ as well as new 20-day highs across all exchanges remains below the level hit on 10/13 even as the SPX ran up to just under 1200.
One of the new additions to the End-of-Day charting section is Up & Down Volume utilizing only the 500 SPX components. Notice from the chart that the cumulative version of SPX up – down volume (black line) put in a top on 10/13 that continues to hold.
NYSE TICK action remains decidedly negative. The 20-day moving average of Cumulative TICK is back in a downtrend, as is Adjusted TICK, while cumulative TICKscore also continues to trend steadily lower. At some point (soon?) the lack of institutional support will most likely undermine this rally. I see from the latest COT data that large traders in ES futures are heavily short. While they can be early, this normally contra-trend group has been consistently on the right side of the market since 2006. I would be surprised if they’re not ultimately proved correct this time around as well.