Persistent Moves on the Monthly and Quarterly S&P Charts

Not a lot to lean on short-term, but interesting to note that today marked only the 13th time in the history of S&P futures that a 3:1+ positive breadth session on the NYSE coincided with a lower high for S&P futures. In each of the last twelve cases the S&P proceeded to post a subsequently lower close (below the setup day’s close) within the next four sessions…

3:1 Positive Breadth and Lower High for S&P Futures
03/08/11… ???
05/21/10… Lower S&P close one session later
05/03/10… Lower S&P close one session later
02/01/10… Lower S&P close three sessions later
04/21/09… Lower S&P close one session later
02/24/09… Lower S&P close one session later
01/21/09… Lower S&P close one session later
12/02/08… Lower S&P close two sessions later
10/30/08… Lower S&P close four sessions later
09/30/08… Lower S&P close two sessions later
01/31/08… Lower S&P close two sessions later
01/28/08… Lower S&P close two sessions later
05/11/07… Lower S&P close one session later

From a longer-term perspective, I’m seeing some bullish signals recently triggered and/or set to trigger later this month…

At the end of last month the S&P500 posted its seventh consecutive ‘higher low’ on the monthly chart. That’s only occurred 14 separate times in the history of the stock market (using Dow Data from 1928-1962 and S&P500 from ’62 to present), of which all but one led to a higher market seven months later…

Seven Months of Higher Lows for the Stock Market
02/28/11… S&P ??? seven months later
01/31/07… S&P +2.5%  seven months later
02/28/97… S&P +19.8% seven months later
07/31/95… S&P +13.9% seven months later
06/30/89… S&P +3.5% seven months later
04/30/86… S&P +5.8% seven months later
03/31/83… S&P +6.9% seven months later
10/31/80… S&P +4.0% seven months later
05/31/61… Dow +4.9% seven months later
11/28/58… Dow +15.5% seven months later
04/30/54… Dow +21.1% seven months later
01/31/50… Dow +7.5% seven months later
11/30/42… Dow +25.2% seven months later
11/30/36… Dow -7.6% seven months later
10/31/35… Dow +9.2% seven months later

Not only has the S&P posted seven straight higher lows on its monthly chart but it’s also posted seven higher highs. When the S&P posts six or more consecutive months of higher highs, the first time that streak is broken with a lower monthly high usually represents a buying opportunity. That’s where we could stand at the end of this month as the S&P has yet to trade above February’s 1344 high. Below is every occurrence since 1930, beginning with the date when the S&P (or Dow prior to 1962) put in a lower monthly high after six or more higher highs and followed by the performance of the stock market over the following month…

Six Higher Monthly Highs followed by Lower Monthly High
02/26/10… SPX +5.9% one month later
03/30/07… SPX +4.3% one month later
06/30/06… SPX +0.5% one month later
04/30/04… SPX +1.2% one month later
06/30/99… SPX -3.2% one month later (higher close five months later)
03/29/96… SPX +1.3% one month later
05/31/91… SPX -4.8% one month later (higher close three months later)
11/30/89… SPX +2.1% one month later
05/29/87… SPX +4.8% one month later
09/30/86… SPX +5.5% one month later
07/29/83… SPX +1.1% one month later
12/31/80… SPX -4.6% one month later (higher close three months later)
08/29/75… SPX -3.5% one month later (higher close two months later)
06/30/72… SPX +0.2% one month later
06/30/67… SPX +4.5% one month later
06/30/64… SPX +1.8% one month later
07/31/63… SPX +4.9% one month later
06/30/61… Dow +3.1% one month later
09/30/59… Dow +2.4% one month later
05/31/55… Dow +6.3% one month later
07/31/50… Dow +3.6% one month later
03/30/46… Dow +3.5% one month later
07/31/45… Dow +7.0% one month later
08/31/43… Dow +2.6% one month later
12/31/36… Dow +3.3% one month later
12/31/35… Dow +3.7% one month later

In 22 out of 26 occurrences, or 85% of the time, the stock market closed higher the following month, significantly above the 59% random chance. Also note that in the four instances in which the market closed lower the following month, we still saw a subsequently higher monthly close at some point within the next six months. Put another way, the price pattern above has almost always (25 out of 26 times) led to a subsequently higher monthly close at some point over the next three months, and usually the next month.  As long as the S&P does not trade above 1344 in  March, this signal will be triggered at the end of the month.

Finally, I would note that as long as we close out March above SPX 1257, it will mark the third consecutive quarterly gain for the S&P500.  Since 1950, there have been 24 separate instances in which the S&P500 initially posted three straight quarterly gains. In every case but one, the S&P proceeded to post a subsequently higher quarterly close within the next nine months (and usually the next quarter)…

S&P500 Rallies Three Consecutive Quarters
12/31/09… Higher Quarterly Close in Three Months
03/30/07… Higher Quarterly Close in Three Months
12/30/05… Higher Quarterly Close in Three Months
12/31/03… Higher Quarterly Close in Three Months
06/30/99… Higher Quarterly Close in Six Months
09/29/95… Higher Quarterly Close in Three Months
12/31/92… Higher Quarterly Close in Three Months
06/30/89… Higher Quarterly Close in Three Months
06/30/87… Higher Quarterly Close in Three Months
06/30/86… Higher Quarterly Close in Nine Months
03/29/85… Higher Quarterly Close in Three Months
03/31/83… Higher Quarterly Close in Three Months
12/31/80… Higher Quarterly Close in Three Months
09/28/79… Higher Quarterly Close in Nine Months
06/30/76… Higher Quarterly Close in Three Months
06/30/75… Higher Quarterly Close in Nine Months
03/31/71… Higher Quarterly Close in Nine Months
12/31/68… No Higher Quarterly Close In Nine Months
06/30/67… Higher Quarterly Close in Three Months
03/29/63… Higher Quarterly Close in Three Months
09/30/58… Higher Quarterly Close in Three Months
06/30/54… Higher Quarterly Close in Three Months
03/31/52… Higher Quarterly Close in Three Months
03/31/50… Higher Quarterly Close in Three Months

I’ll review these signals again towards the end of March.

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

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