Catching Bottoms with the NYSE Up Volume Average

The 20-day moving average of NYSE up volume (expressed as a percentage of total volume) is set to close below the 40% level for the third consecutive session Thursday. That will trigger a buy signal that remains in effect until the moving average rebounds back above 40%. Historically, consecutive readings in this territory indicate buyers have been completely washed out of the market. The table below lists every occurrence since 1980 in which the 20-day average closed under 40% three days in a row, along with the date when it rose back over 40% and the performance of the S&P in this time frame…

Up Volume 20day Avg <40% Three Consecutive Days
08/04/11 – ??/??/??… S&P500 ???
05/21/10 – 06/02/10… S&P500 +1.0%
03/09/09 – 03/11/09… S&P500 +6.6%
10/10/08 – 10/31/08… S&P500 +7.7%
07/16/08 – 07/17/08… S&P500 +1.2%
08/16/07 – 08/17/07… S&P500 +2.5%
02/13/03 – 02/18/03… S&P500 +4.1%
10/08/02 – 10/14/02… S&P500 +5.4%
07/18/02 – 07/29/02… S&P500 +2.4%
06/25/02 – 06/27/02… S&P500 +1.5%
09/19/01 – 10/02/01… S&P500 +3.5%
08/31/98 – 09/01/98… S&P500 +3.8%
08/17/98 – 08/18/98… S&P500 +1.6%
07/24/96 – 08/01/96… S&P500 +3.7%
12/09/94 – 12/14/94… S&P500 +1.8%
07/05/94 – 07/07/94… S&P500 +0.5%
04/15/94 – 04/25/94… S&P500 +1.5%
08/27/92 – 09/02/92… S&P500 +1.1%
12/10/91 – 12/16/91… S&P500 +1.7%
06/28/91 – 07/08/91… S&P500 +1.8%
01/09/91 – 01/17/91… S&P500 +5.3%
09/27/90 – 10/18/90… S&P500 +3.8%
08/07/90 – 08/31/90… S&P500 -3.7% (*)
04/25/90 – 05/03/90… S&P500 +1.1%
01/29/90 – 02/07/90… S&P500 +2.6%
11/06/89 – 11/08/89… S&P500 +1.7%
11/16/88 – 11/29/88… S&P500 +2.7%
08/30/88 – 09/02/88… S&P500 +0.8%
05/25/88 – 05/26/88… S&P500 +0.3%
12/07/87 – 12/08/87… S&P500 +2.7%
10/20/87 – 11/05/87… S&P500 +7.5%
09/22/87 – 09/28/87… S&P500 +1.2%
01/02/87 – 01/05/87… S&P500 +2.3%
09/30/85 – 10/02/85… S&P500 +1.1%
09/19/85 – 09/23/85… S&P500 +0.5%
12/05/84 – 12/14/84… S&P500 +0.4%
07/23/84 – 07/26/84… S&P500 +0.8%
05/25/84 – 06/19/84… S&P500 +0.7%
02/07/84 – 03/01/84… S&P500 -0.3% (*)
11/08/83 – 11/09/83… S&P500 +1.4%
08/10/82 – 08/20/82… S&P500 +9.9%
07/06/82 – 07/08/82… S&P500 +0.2%
06/02/82 – 06/28/82… S&P500 -1.6% (*)
01/07/82 – 01/28/82… S&P500 -0.0% (*)
09/02/81 – 10/02/81… S&P500 -3.3% (*)
12/17/80 – 12/18/80… S&P500 +0.1%
03/05/80 – 04/08/80… S&P500 -8.9% (*)

Note that in 36 out of the last 37 occurrences, or 97% of the time, the S&P was trading at a higher level when the Up Volume 20-day average rebounded back over 40%. Sometimes it took just a few days, other times it was a number of weeks before it occurred. I extended the track record back to 1980 to show that performance hasn’t always been this stellar, but performance post-1982 has been impressive. About half of the time the S&P posted at least one subsequently lower close at some point before the setup was fulfilled, which wouldn’t be a surprise given today’s elevated put/call ratio (see below). But this does suggest we’re at or near a tradable bottom.

CBOE Equity Put/Call Ratio Closes >= .90
06/15/11… Lower S&P close one session later
06/10/11… No lower S&P close within five sessions
06/08/11… Lower S&P close one session later
05/20/10… Lower S&P close four sessions later
03/05/09… Lower S&P close two sessions later
02/19/09… Lower S&P close one session later
02/17/09… Lower S&P close one session later
01/12/09… Lower S&P close two sessions later
01/07/09… Lower S&P close two sessions later
12/12/08… Lower S&P close one session later
11/18/08… Lower S&P close one session later
11/10/08… Lower S&P close one session later
11/06/08… Lower S&P close three sessions later
10/23/08… Lower S&P close one session later
10/15/08… Lower S&P close five sessions later
10/09/08… Lower S&P close one session later
10/06/08… Lower S&P close one session later
09/15/08… Lower S&P close two sessions later
09/09/08… Lower S&P close four sessions later
07/10/08… Lower S&P close one session later
06/20/08… Lower S&P close two sessions later
04/15/08… No lower S&P close within five sessions
04/08/08… Lower S&P close one session later
03/19/08… No lower S&P close within five sessions
03/14/08… Lower S&P close one session later
03/06/08… Lower S&P close one session later
03/04/08… Lower S&P close two sessions later
02/28/08… Lower S&P close one session later
02/05/08… Lower S&P close one session later
01/17/08… Lower S&P close one session later

Categories : Archived Intraday Commentary, Intraday Commentary

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