Positive Breadth but a Lower High for S&P Futures

When S&P futures fail to post a higher high despite lopsided positive breadth, it’s usually a short-term negative sign. In the table below I’ve noted every instance since 1990 in which the NYSE advance/decline ratio closed above 2.50 and S&P futures put in a lower high. Note the tendency to see a lower close (below the setup day’s close) within the next week, with 24 out of 25 occurrences leading to a subsequently lower close within the next five sessions…

NYSE Adv/Dec Ratio >2.50, S&P Futures Post Lower High
03/17/11… ???
03/08/11… Lower S&P futures close one session later
06/25/10… Lower S&P futures close one session later
05/21/10… Lower S&P futures close one session later
05/03/10… Lower S&P futures close one session later
02/24/10… Lower S&P futures close one session later
02/01/10… Lower S&P futures close three sessions later
11/13/09… Lower S&P futures close five sessions later
04/21/09… Lower S&P futures close one session later
02/24/09… Lower S&P futures close one session later
01/21/09… Lower S&P futures close one session later
12/02/08… Lower S&P futures close two sessions later
10/30/08… Lower S&P futures close four sessions later
09/30/08… Lower S&P futures close two sessions later
03/20/08… Lower S&P futures close five sessions later
01/31/08… Lower S&P futures close two sessions later
01/28/08… Lower S&P futures close two sessions later
05/11/07… Lower S&P futures close one session later
05/31/06… Lower S&P futures close three sessions later
03/29/06… Lower S&P futures close one session later
12/28/04… Lower S&P futures close two sessions later
09/16/04… Lower S&P futures close two sessions later
03/12/04… Lower S&P futures close one session later
04/17/03… No lower close within next five sessions
01/31/03… Lower S&P futures close two sessions later
12/31/98… Lower S&P futures close one session later

This suggests we’ll see a close below today’s settlement within the next week. About half the time the lower close came the next session, the other half it took anywhere from 2-5 sessions.  Not a huge help in itself, but could be useful if some other short-term bearish signals trigger. Overall it looks as though the market put in a bottom on Wednesday, so in general not bearish but respect the fact that recent technical damage will take some time to repair, which could lead to choppy conditions. Too much strength (1%+ gain) or a strong open (above previous day’s high) on OpEx will trigger a sell, so from a bullish perspective better to not see either of those developments on Friday.

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

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