Steadily Improving Market Internals vs. Oversold Volatility

Volatility closed in oversold territory on Thursday. VXO closed under its lower bollinger band, which usually means limited upside for stocks next few sessions. Below is every occurrence of a similarly oversold VXO since 2000. 37 cases, S&P 14-23 over next three sessions. Decent downside edge but limited upside the more reliable recurring theme. 1% moves were 3-14…

VXO Closes Under its Lower Bollinger Band
04/21/11… OEX ???  three sessions later
11/08/10… OEX -1.0% three sessions later
09/03/10… OEX +0.2% three sessions later
08/02/10… OEX -0.1% three sessions later
12/22/09… OEX +0.8% three sessions later
06/29/09… OEX -3.0% three sessions later
05/18/09… OEX -2.4% three sessions later
05/04/09…  OEX +0.0% three sessions later
04/17/09…  OEX -3.4% three sessions later
04/09/09… OEX -0.6% three sessions later
12/19/08… OEX -1.7% three sessions later
05/19/08…  OEX -2.5% three sessions later
02/25/08…  OEX -0.1% three sessions later
12/21/07…  OEX -0.5% three sessions later
09/21/07…  OEX +0.1% three sessions later
11/17/06…  OEX +0.2% three sessions later
08/16/06…  OEX +0.5% three sessions later
11/03/05…  OEX +0.1% three sessions later
09/09/05… OEX -1.1% three sessions later
06/21/05…  OEX -1.9% three sessions later
04/12/05…  OEX -3.2% three sessions later
02/04/05… OEX -0.5% three sessions later
02/01/05…  OEX +1.2% three sessions later (*)
12/21/04…  OEX +0.1% three sessions later
06/08/04…  OEX -1.2% three sessions later
07/25/03…  OEX -1.1% three sessions later
05/16/03…  OEX -2.2% three sessions later
04/17/03…  OEX +3.0% three sessions later (*)
04/14/03…  OEX +0.9% three sessions later
11/20/02…  OEX +2.1% three sessions later (*)
11/15/02…  OEX +0.7% three sessions later
12/27/01…  OEX -0.3% three sessions later
12/19/01…  OEX -0.6% three sessions later
10/26/01…  OEX -4.2% three sessions later
05/21/01…  OEX -1.5% three sessions later
01/23/01…  OEX  -0.4% three sessions later
08/08/00…  OEX  -0.2% three sessions later
06/29/00…  OEX  +0.5% three sessions later

I’m expecting consolidation rather than a sustained move lower. Market internals improved consistently over the last few sessions which usually means higher prices short-term. S&P futures posted three consecutive higher highs as of Thursday’s close, and each higher high coincided with an expansion of total new 52-week highs (NY+ND) and a contraction of total new 52-week lows.  Looking back at the last 30 occurrences, 27 (90%) led to a higher S&P 2-3 sessions later vs. a 63% random chance…

Three Higher Highs for S&P Futures, Total New 52wk Highs (NY+ND) Expand, New Lows Contract Each Day
04/21/11… S&P futures ???
07/26/10… S&P futures -1.1% three sessions later
07/23/10… S&P futures +0.9% two sessions later
07/22/10… S&P futures +2.0% two sessions later
06/14/10… S&P futures +2.2% two sessions later
06/11/10… S&P futures +2.2% two sessions later
02/18/10… S&P futures +0.2% two sessions later
11/09/09… S&P futures +0.4% two sessions later
11/06/09… S&P futures +2.4% two sessions later
08/24/09… S&P futures +0.2% two sessions later
07/15/09… S&P futures +1.1% two sessions later
11/30/07… S&P futures +0.2% three sessions later
10/29/07… S&P futures +0.5% two sessions later
06/15/07… S&P futures +0.1% two sessions later
03/08/07… S&P futures +0.2% two sessions later
11/07/06… S&P futures -0.3% three sessions later
08/16/06… S&P futures +0.6% two sessions later
03/15/06… S&P futures +0.2% two sessions later
02/16/06… S&P futures +0.0% three sessions later
10/03/05… S&P futures -2.8% three sessions later
12/22/04… S&P futures +0.4% three sessions later
11/03/04… S&P futures +2.0% three sessions later
10/04/04… S&P futures +0.6% two sessions later
08/18/04… S&P futures +0.4% two sessions later
05/27/04… S&P futures +0.2% three sessions later
05/26/04… S&P futures +0.4% two sessions later
05/25/04… S&P futures +0.9% two sessions later
02/27/04… S&P futures +0.4% two sessions later
11/26/03… S&P futures +1.2% two sessions later
07/29/02… S&P futures +2.0% two sessions later
02/27/02… S&P futures +1.9% two sessions later

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

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