Second Breakaway Move in Two Days Points to Bounce

With stocks coming under significant selling pressure Friday, it’s noteworthy that new 52-week lows are down from Thursday’s levels on both the NYSE and NASDAQ. If this divergence holds into the close, it would have short-term bullish implications. The last thirty times that the SPX and NDX hit fresh 5-day lows and new 52-week lows declined on both exchanges are listed in the table below…

SPX & NDX Hit 5-Day Lows, New 52-week Lows Decline
08/25/10… Higher SPX close two sessions later
07/20/10… Higher SPX close two sessions later
06/30/10… No higher close within two sessions
01/28/10… Higher SPX close two sessions later
11/20/09… Higher SPX close one session later
07/07/09… Higher SPX close two sessions later
02/23/09… Higher SPX close one session later
12/02/08… Higher SPX close one session later
11/21/08… Higher SPX close one session later
10/09/08… Higher SPX close two sessions later
10/07/08… No higher close within two sessions
09/18/08… Higher SPX close one session later
09/17/08… Higher SPX close one session later
08/20/08… Higher SPX close one session later
06/12/08… Higher SPX close one session later
06/03/08… Higher SPX close two sessions later
01/23/08… Higher SPX close one session later
01/07/08… No higher close within two sessions
11/21/07… Higher SPX close one session later
11/12/07… Higher SPX close one session later
11/09/07… Higher SPX close two sessions later
07/31/07… Higher SPX close one session later
06/08/07… Higher SPX close one session later
04/12/07… Higher SPX close one session later
12/22/06… Higher SPX close one session later
11/03/06… Higher SPX close one session later
05/18/06… Higher SPX close one session later
01/03/06… Higher SPX close one session later
12/08/05… Higher SPX close one session later
11/30/05… Higher SPX close one session later

In 27 out of 30 cases, or 90% of the time, the S&P closed higher (above the setup day’s close) within the next two sessions, significantly above the 68% at-any-time odds for a higher SPX close within two days…

Another positive indication for Monday is the fact that S&P futures are in the process of posting a second consecutive session without a move above the previous day’s close. Historically, that’s an indication the market is short-term oversold and likely to bounce the following session. The last 30 occurrences are listed below…

S&P Futures Do Not Trade >Previous Day’s Settlement Two Consecutive Sessions
11/12/10… S&P futures ??? next session
08/11/10… S&P futures -0.5% next session
08/06/10… S&P futures +0.5% next session
11/20/09… S&P futures +1.3% next session
10/02/09… S&P futures +1.4% next session
08/17/09… S&P futures +1.2% next session
07/29/09… S&P futures +0.8% next session
04/07/09… S&P futures +1.1% next session
03/30/09… S&P futures +1.3% next session
03/02/09… S&P futures -2.3% next session
11/12/08… S&P futures +6.4% next session
11/06/08… S&P futures +3.5% next session
10/22/08… S&P futures +1.4% next session
02/29/08… S&P futures +0.1% next session
02/05/08… S&P futures -1.0% next session
12/17/07… S&P futures +0.7% next session
12/04/07… S&P futures +1.6% next session
10/19/07… S&P futures +0.5% next session
10/16/07… S&P futures +0.3% next session
08/28/07… S&P futures +1.9% next session
06/06/07… S&P futures -1.8% next session
03/28/07… S&P futures +0.1% next session
11/27/06… S&P futures +0.4% next session
09/07/06… S&P futures +0.2% next session
08/01/06… S&P futures +0.6% next session
07/13/06… S&P futures -0.4% next session
01/18/06… S&P futures +0.4% next session
08/05/05… S&P futures -0.2% next session
03/22/04… S&P futures -0.2% next session
09/10/03… S&P futures +0.3% next session
09/30/02… S&P futures +4.8% next session

In 23 out of the past 30 cases, or 77% of the time, S&P futures settled higher the following session, significantly above the 55% random chance for a higher S&P close one day later in the same time frame. The S&P ended the next session down more than 1% only twice, while it rallied more than 1% eleven times.

Categories : Archived Intraday Commentary, Intraday Commentary

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