Early Selloff, Afternoon Recovery Not So Positive for Next Session

Update: Second study added

SPY traded below Brett Steenbarger’s volatility-adjusted S2 target at 130.61 early Tuesday before rebounding to close above R2 at 131.80. That’s happened a total of 30 times since SPY’s inception, all of which are listed below along with the market’s performance the following session…

SPY Trades Below Steenbarger S2, Closes Above R2
03/29/11… S&P500 ??? next session
01/05/11… S&P500 -0.2% next session
08/27/10… S&P500 -1.5% next session
07/20/10… S&P500 -1.3% next session
12/14/09… S&P500 -0.5% next session
12/16/08… S&P500 -1.0% next session
11/13/08… S&P500 -5.0% next session
05/06/08… S&P500 -1.8% next session
01/23/08… S&P500 +0.8% next session
09/19/07… S&P500 -0.7% next session
07/11/07… S&P500 +1.6% next session
06/08/07… S&P500 +0.2% next session
05/30/07… S&P500 -0.1% next session
04/12/07… S&P500 +0.5% next session
03/22/06… S&P500 -0.2% next session
11/11/05… S&P500 -0.1% next session
11/10/05… S&P500 +0.3% next session
10/19/05… S&P500 -1.8% next session
07/20/05… S&P500 -0.6% next session
04/12/05… S&P500 -1.2% next session
12/09/04… S&P500 +0.1% next session
02/20/02… S&P500 -2.1% next session
01/02/02… S&P500 +1.1% next session
10/25/01… S&P500 -0.2% next session
05/16/01… S&P500 +0.2% next session
05/04/01… S&P500 -0.9% next session
01/03/01… S&P500 -1.1% next session
05/24/00… S&P500 -1.7% next session
02/15/00… S&P500 -1.5% next session
04/12/99… S&P500 -0.6% next session
10/28/97… S&P500 -0.3% next session

In 22 out of the last 30 cases, or 73% of the time, the S&P closed lower the following session, significantly above the 46% random chance for a lower S&P close one day later in the same time frame. Only three cases led to a gain of more than 0.5% the next day, while fifteen led to an S&P down more than 0.5%.

That said, I wouldn’t look for too much on the downside, most likely just a day of consolidation. Note that S&P futures opened higher for a fourth consecutive session Tuesday, a pattern that has rarely led to a significant selloff the next day. The table below lists each of the 51 separate occurrences since 2005 in which S&P futures opened higher four consecutive sessions. I’ve starred those instances in which the S&P closed down in excess of 0.5% the next day. Since 2007 it’s only occurred once out of 33 instances. Since ’05 it’s only occurred four times…

S&P Futures Open Up Four Consecutive Sessions
03/29/11… S&P futures  ??? next session
03/02/11… S&P futures +1.8% next session
12/10/10… S&P futures +0.0% next session
10/25/10… S&P futures unch next session
09/13/10… S&P futures -0.0% next session
07/26/10… S&P futures +0.1% next session
07/08/10… S&P futures +0.5% next session
06/10/10… S&P futures +0.5% next session
03/30/10… S&P futures -0.4% next session
03/19/10… S&P futures +0.5% next session
03/03/10… S&P futures +0.3% next session
02/02/10… S&P futures -0.1% next session
12/23/09… S&P futures +0.6% next session
12/14/09… S&P futures -0.4% next session
09/09/09… S&P futures +0.9% next session
06/01/09… S&P futures +0.4% next session
03/13/09… S&P futures -0.1% next session
12/26/08… S&P futures +0.2% next session
07/28/08… S&P futures +2.2% next session
07/21/08… S&P futures +1.0% next session
05/15/08… S&P futures +0.1% next session
04/28/08… S&P futures -0.5% next session
03/24/08… S&P futures -0.0% next session
02/14/08… S&P futures +0.0% next session
01/29/08… S&P futures -0.8% next session  (*)
12/12/07… S&P futures -0.1% next session
11/28/07… S&P futures +0.1% next session
07/17/07… S&P futures -0.3% next session
07/05/07… S&P futures +0.5% next session
06/18/07… S&P futures +0.2% next session
05/25/07… S&P futures +0.3% next session
05/03/07… S&P futures +0.4% next session
04/03/07… S&P futures +0.1% next session
03/26/07… S&P futures -0.3% next session
09/01/06… S&P futures +0.2% next session
07/21/06… S&P futures +1.8% next session
06/29/06… S&P futures -0.3% next session
05/26/06… S&P futures -1.8% next session (*)
04/12/06… S&P futures -0.1% next session
04/03/06… S&P futures +0.7% next session
01/26/06… S&P futures +0.9% next session
12/21/05… S&P futures +0.4% next session
11/21/05… S&P futures +0.4% next session
10/06/05… S&P futures +0.3% next session
09/06/05… S&P futures +0.1% next session
07/01/05… S&P futures +0.8% next session
05/23/05… S&P futures -0.2% next session
05/09/05… S&P futures -1.0% next session (*)
03/22/05… S&P futures +0.0% next session
03/15/05… S&P futures -0.9% next session (*)
02/02/05… S&P futures -0.3% next session
01/26/05… S&P futures +0.1% next session

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

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