Major Averages Surge, Semiconductors Lag to Kick Off 2011

Recall from this December 28th column that after five consecutive up weeks, the S&P has gained more than 1.5% the next week only once out of the last thirty occurrences. With the S&P already up 1.1% for the week, this suggests limited upside potential over the next four sessions.

Semiconductors underperformed significantly Monday, with the SOX only up half the amount of the NDX on a percentage basis. That’s a short-term negative sign for the next couple of sessions. In the table below is every case since 2000 in which both the NDX and SOX closed up at least 0.5% but the NDX more than doubled the percentage gain of the SOX. Note that in 22 out of 26 instances, or 85% of the time, the Nasdaq closed at a lower level two sessions later, a major edge over the 48% random chance for a lower NDX two days later. Only two cases led to a gain of more than 0.5%, while fourteen led to a drop of more than 0.5%…

NDX & SOX +0.5% or more & NDX Doubles SOX Gain
01/03/11… Nasdaq ??? two days later
10/15/10… Nasdaq -1.3% two days later
09/20/10… Nasdaq -0.3% two days later
07/23/09… Nasdaq -0.1% two days later
03/31/09… Nasdaq +4.6% two days later (*)
12/08/08… Nasdaq -0.2% two days later
12/02/08… Nasdaq -0.2% two days later
09/11/08… Nasdaq -3.8% two days later
07/25/08… Nasdaq -0.1% two days later
07/08/08… Nasdaq -1.7% two days later
10/05/07… Nasdaq +1.0% two days later (*)
08/24/07… Nasdaq -3.2% two days later
02/27/06… Nasdaq -0.1% two days later
04/25/05… Nasdaq -0.9% two days later
10/18/04… Nasdaq -0.3% two days later
07/27/04… Nasdaq +0.5% two days later
12/01/03… Nasdaq -1.9% two days later
09/18/03… Nasdaq -2.4% two days later
03/25/03… Nasdaq -0.4% two days later
04/08/02… Nasdaq -2.1% two days later
05/02/01… Nasdaq -2.0% two days later
05/01/01… Nasdaq -2.2% two days later
03/27/01… Nasdaq -9.9% two days later
01/23/01… Nasdaq -4.9% two days later
08/24/00… Nasdaq +0.1% two days later
06/30/00… Nasdaq -3.0% two days later
05/05/00… Nasdaq -6.6% two days later

Looking beyond the next few days, it was a bullish sign to see the 14-day RSI for the S&P500 close above the 75 level Monday. We’ve seen the SPX 14-day RSI cross the 75 level a total of 27 times since 1995, 24 of which led to a higher S&P up one month later…

S&P500 14-day RSI Closes Over 75
01/03/11 RSI >75… S&P ??? one month later
11/04/10 RSI >75… S&P +0.3% one month later
04/14/10 RSI >75… S&P -3.2% one month later (*)
03/17/10 RSI >75… S&P +3.9% one month later
08/03/09 RSI >75… S&P +1.8% one month later
10/23/06 RSI >75… S&P +1.7% one month later
11/12/04 RSI >75… S&P +1.2% one month later
01/21/04 RSI >75… S&P -0.0% one month later
01/05/04 RSI >75… S&P +1.2% one month later
11/23/98 RSI >75… S&P +1.3% one month later
04/02/98 RSI >75… S&P +0.1% one month later
03/19/98 RSI >75… S&P +3.0% one month later
06/19/97 RSI >75… S&P +1.9% one month later
06/12/97 RSI >75… S&P +3.8% one month later
11/13/96 RSI >75… S&P -0.3% one month later
11/07/96 RSI >75… S&P +1.6% one month later
10/04/96 RSI >75… S&P +0.3% one month later
02/07/96 RSI >75… S&P +0.6% one month later
12/05/95 RSI >75… S&P +0.0% one month later
09/11/95 RSI >75… S&P +0.8% one month later
06/22/95 RSI >75… S&P +0.5% one month later
05/03/95 RSI >75… S&P +2.5% one month later
04/13/95 RSI >75… S&P +3.2% one month later
04/06/95 RSI >75… S&P +2.8% one month later
03/24/95 RSI >75… S&P +2.4% one month later
02/24/95 RSI >75… S&P +2.6% one month later
02/10/95 RSI >75… S&P +1.8% one month later
02/03/95 RSI >75… S&P +1.5% one month later

Also noteworthy that following a 75+ RSI reading, the first sub-70 reading usually leads to a rebound in price over the next week, suggesting a pullback over the next couple of sessions could represent a buying opportunity. Here’s a look at the last thirty occurrences…

S&P500 14-day RSI Closes <70 after closing >75 Within Last Ten Days
01/03/11 RSI >75… ??/??/?? RSI <70… ???
11/04/10 RSI >75… 11/09/10 RSI <70… SPX -2.9% one week later
04/14/10 RSI >75… 04/16/10 RSI <70… SPX +2.1% one week later
03/17/10 RSI >75… 03/19/10 RSI <70… SPX +0.6% one week later
08/03/09 RSI >75… 08/06/09 RSI <70… SPX +1.6% one week later
10/23/06 RSI >75… 10/27/06 RSI <70… SPX -1.0% one week later
11/12/04 RSI >75… 11/16/04 RSI <70… SPX +0.1% one week later
01/05/04 RSI >75… 01/09/04 RSI <70… SPX +1.6% one week later
11/23/98 RSI >75… 11/30/98 RSI <70… SPX +2.1% one week later
03/19/98 RSI >75… 03/27/98 RSI <70… SPX +2.5% one week later
06/12/97 RSI >75… 06/23/97 RSI <70… SPX +0.7% one week later
10/04/96 RSI >75… 10/09/96 RSI <70… SPX +1.1% one week later
02/07/96 RSI >75… 02/15/96 RSI <70… SPX +1.2% one week later
12/05/95 RSI >75… 12/07/95 RSI <70… SPX +0.1% one week later
09/11/95 RSI >75… 09/22/95 RSI <70… SPX +0.5% one week later
06/22/95 RSI >75… 06/26/95 RSI <70… SPX +0.5% one week later
03/24/95 RSI >75… 03/31/95 RSI <70… SPX +1.1% one week later
02/03/95 RSI >75… 02/17/95 RSI <70… SPX +0.4% one week later
08/30/94 RSI >75… 09/01/94 RSI <70… SPX -1.1% one week later
02/04/93 RSI >75… 02/08/93 RSI <70… SPX -3.1% one week later
12/08/92 RSI >75… 12/10/92 RSI <70… SPX +0.2% one week later
02/05/91 RSI >75… 02/20/91 RSI <70… SPX +0.7% one week later
05/21/90 RSI >75… 05/25/90 RSI <70… SPX +3.6% one week later
07/31/89 RSI >75… 08/04/89 RSI <70… SPX +0.2% one week later
05/19/89 RSI >75… 05/23/89 RSI <70… SPX +0.7% one week later
01/27/89 RSI >75… 02/09/89 RSI <70… SPX -0.4% one week later
08/10/87 RSI >75… 08/18/87 RSI <70… SPX +2.3% one week later
06/22/87 RSI >75… 06/24/87 RSI <70… SPX -1.3% one week later
03/23/87 RSI >75… 03/27/87 RSI <70… SPX +1.5% one week later
01/15/87 RSI >75… 01/23/87 RSI <70… SPX +1.5% one week later
02/18/86 RSI >75… 02/19/86 RSI <70… SPX +2.0% one week later

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

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