When a -100,000 Cumulative TICK Fails to Produce a Major SPX Selloff

Relentlessly negative NYSE TICK action led to one of the lowest Cumulative TICK closes of the year Monday. It’s become customary over the last few months for price to shrug off weak TICK action, and today’s session was certainly no exception. To give you an idea of how unusual it is (perhaps not recently, but historically) to see a flat close on very negative TICKs, here’s a rundown of every Cumulative TICK close in excess of -100,000 since the elimination of the uptick rule in ’07 along with the S&P500′s performance on that day…

NYSE Cumulative TICK <-100,000
12/13/10… -126,490… S&P +0.0% (*)
11/09/10… -100,926… S&P -0.8% (*)
09/13/10… -115,166… S&P +1.1% (*)
08/11/10… -138,523… S&P -2.8%
06/29/10… -112,431… S&P -3.1%
06/04/10… -106,841… S&P -3.4%
05/06/10… -159,748… S&P -3.2%
02/04/10… -125,037… S&P -3.1%
10/28/09… -110,640… S&P -2.0%
06/22/09… -116,231… S&P -3.1%
04/20/09… -118,299… S&P -4.3%
03/06/09… -103,658… S&P +0.1% (*)
03/05/09… -141,807… S&P -4.3%
03/02/09… -163,753… S&P -4.7%
02/23/09… -134,831… S&P -3.5%
02/19/09… -107,365… S&P -1.2%
02/17/09… -142,360… S&P -4.6%
01/20/09… -101,646… S&P -5.3%
01/14/09… -103,027… S&P -3.4%
12/01/08… -112,488… S&P -8.9%
11/20/08… -133,754… S&P -6.7%
11/19/08… -171,459… S&P -6.1%
11/12/08… -142,875… S&P -5.2%
10/09/08… -135,465… S&P -7.6%
10/07/08… -107,960… S&P -5.7%
10/06/08… -142,048… S&P -3.9%
09/29/08… -154,512… S&P -8.8%
09/17/08… -128,458… S&P -4.7%
09/15/08… -116,000… S&P -4.7%
09/09/08… -114,605… S&P -3.4%
07/14/08… -105,540… S&P -0.9% (*)
03/10/08… -100,375… S&P -1.6%
03/06/08… -105,574… S&P -2.2%
11/07/07… -112,435… S&P -2.9%
07/26/07… -101,700… S&P -2.3%
07/24/07… -120,307… S&P -2.0%

It’s quite clear that a big negative Cumulative TICK usually coincides with a major down day for the market. Of the 36 occurrences since mid-2007, the S&P’s average loss was a whopping 4.0%. Obviously, it’s quite unusual to see the S&P lose less than 1%, with only four occurrences prior to today (those cases are highlighted with an asterisk in the table above).  Interestingly,  the market moved consistently higher over the next month in all four of those cases, sometimes significantly higher…

11/09/10… +1.2% one month later
09/13/10… +3.9% one month later
03/06/09… +23.3% one month later
07/14/08… +6.3% one month later

Borrowing a page from Wayne Whaley‘s playbook, I’ve been researching his various ‘thrust’ indicators, which provide an overview of breadth, volume and new highs/lows across various time frames. They’re all calculated in the same manner, such as up volume divided by the sum of up & down volume across the last ten sessions representing the UDT10 indicator. Substituting advancers and decliners or new highs and lows for volume creates the other thrust indicators, and of course you can mix up the number of days used in the calculation. I bring this up today because the UDT10 for the NYSE hit an unusually high level last Friday (>65%), and historically that has had positive implications looking out over the next ten sessions…

NYSE UDT10 Tops 65% First Time in Two Weeks
12/10/10… S&P500 ??? two weeks later
09/10/10… S&P500 +3.5% two weeks later
03/09/10… S&P500 +3.0% two weeks later
09/16/09… S&P500 -1.1% two weeks later
07/23/09… S&P500 +2.1% two weeks later
04/14/09… S&P500 +1.6% two weeks later
03/18/09… S&P500 +2.1% two weeks later
12/05/08… S&P500 +1.4% two weeks later
12/10/07… S&P500 -1.3% two weeks later
11/05/04… S&P500 +0.4% two weeks later
08/27/04… S&P500 +1.6% two weeks later
12/30/03… S&P500 +1.9% two weeks later
10/14/03… S&P500 -0.3% two weeks later
06/04/03… S&P500 +2.4% two weeks later
03/25/03… S&P500 +0.4% two weeks later
10/23/02… S&P500 +3.1% two weeks later
08/19/02… S&P500 -7.7% two weeks later
10/22/98… S&P500 +5.1% two weeks later
05/05/97… S&P500 +0.4% two weeks later
08/07/96… S&P500 +0.1% two weeks later
12/30/91… S&P500 +1.3% two weeks later
01/24/91… S&P500 +6.5% two weeks later
12/05/90… S&P500 +0.1% two weeks later
05/11/90… S&P500 +0.7% two weeks later

Out of 23 occurrences, 19 led to a higher S&P close two weeks later. The S&P was down over 1.5% two weeks later only once, while it was up over 1.5% eleven times.

Wayne recently shifted to utilizing statistics based solely on S&P500 components given the increasingly misleading datasets released by the NYSE (today’s new 52-week lows being a prime example). Pull up this comparison chart of standard new lows in black and common-stock only new lows in red for an illustration.  I’ll be adding in charts and data highlighting some of these thrust indicators (based on SPX stats) in the coming weeks.

Euphoria in the options market continued Monday as the CBOE recorded its sixth consecutive session of a sub-.50 equity put/call ratio. That sent the 10-day moving average under .50 as well, an extremely low reading from a historical perspective. This is usually a bearish longer-term indication. Since 2001, there have only been five separate instances in which the 10-day average fell under .50 (for the first time in two weeks or more). In 4 out of those 5 cases the stock market was trading lower two months later, sometimes significantly lower…

CBOE Equity Put/Call Ratio 10-day Average <.50
12/13/10… S&P500 ??? two months later
04/12/10… S&P500 -11.2% two months later
01/16/04… S&P500 -2.6% two months later
12/30/03… S&P500 +3.2% two months later
05/01/01… S&P500 -4.4% two months later
01/24/01… S&P500 -18.1% two months later

S&P futures opened above the previous session’s high for the third day in a row Monday, triggering a one-day buy signal for Tuesday (you may recall this signal was also triggered at Friday’s close – see this column from last Thursday  for details)

Given that today’s NYSE TICK high of +586 was the lowest high of the year, I’d also note that unusually low intraday highs usually precede a higher S&P close (above the setup day’s close) within the next few sessions. In the table below I’ve extracted the last thirty instances in which the NYSE TICK posted its lowest intraday high in at least two months…

NYSE TICK Posts Lowest High in Two Months
12/13/10… ???
12/06/10… Higher S&P close  one session later
11/09/10… Higher S&P close  one session later
09/13/10… Higher S&P close  two sessions later
08/05/10… Higher S&P close  two sessions later
04/15/10… No higher S&P close within three sessions
02/04/10… Higher S&P close  one session later
12/22/09… Higher S&P close one session later
12/21/09… Higher S&P close one session later
10/28/09… Higher S&P close one session later
07/02/09… Higher S&P close one session later
06/22/09… Higher S&P close one session later
06/16/09… Higher S&P close two sessions later
03/02/09… Higher S&P close two sessions later
12/24/08… Higher S&P close one session later
09/09/08… Higher S&P close one session later
06/11/08… Higher S&P close one session later
05/30/08… No higher S&P close within three sessions
05/07/08… Higher S&P close one session later
03/06/08… Higher S&P close three sessions later
02/21/08… Higher S&P close one session later
10/19/07… Higher S&P close one session later
10/08/07… Higher S&P close one session later
07/24/07… Higher S&P close one session later
07/16/07… Higher S&P close three sessions later
07/11/07… Higher S&P close one session later
07/10/07… Higher S&P close one session later
07/03/07… Higher S&P close one session later
05/07/07… Higher S&P close two sessions later
04/30/07… Higher S&P close one session later
12/18/06… Higher S&P close one session later

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

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