When the SPX Quickly Recoups a Large Selloff
By
Rennie on Friday, August 12th, 2011 at 1:02 pm
As long as the S&P500 closes above 1172.53 today, the index will have recouped the entire 4.4% loss posted Wednesday. When stocks quickly recoup a large selloff, buyers are often exhausted for the short-term and sellers usually gain the upper hand. Here’s a look at each of the last 30 instances in which the S&P500 closed down in excess of 1.5% and then recouped that entire loss over the next two sessions. The date shown in the table below is the date when the market recouped the loss from two sessions ago. Notice the consistent tendency for selling pressure to re-emerge over the next 2-4 sessions…
S&P500 Closes Down 1.5%+, Recoups Entire Loss Two Sessions Later
03/03/11… S&P500 -1.6% two sessions later
02/01/11… S&P500 -0.0% two sessions later
06/03/10… S&P500 -4.8% two sessions later
05/11/10… S&P500 -1.7% three sessions later
05/29/09… S&P500 +2.5% four sessions later (*)
05/26/09… S&P500 -0.4% two sessions later
04/16/09… S&P500 -3.8% two sessions later
04/09/09… S&P500 -1.8% two sessions later
03/26/09… S&P500 -5.4% two sessions later
03/24/09… S&P500 -2.3% four sessions later
12/08/08… S&P500 -1.2% two sessions later
11/24/08… S&P500 -4.2% four sessions later
10/28/08… S&P500 +2.7% four sessions later (*)
10/13/08… S&P500 -9.5% two sessions later
09/25/08… S&P500 -8.5% two sessions later
09/19/08… S&P500 -5.3% two sessions later
08/11/08… S&P500 -1.5% two sessions later
07/30/08… S&P500 -1.9% two sessions later
06/13/08… S&P500 -0.7% two sessions later
03/24/08… S&P500 -0.7% two sessions later
03/18/08… S&P500 -0.1% two sessions later
03/12/08… S&P500 -1.6% two sessions later
01/29/08… S&P500 +1.4% four sessions later (*)
01/10/08… S&P500 -0.3% two sessions later
11/28/07… S&P500 -0.4% four sessions later
08/07/07… S&P500 -1.6% two sessions later
06/01/06… S&P500 -1.6% two sessions later
10/24/05… S&P500 -0.7% two sessions later
04/22/04… S&P500 -0.4% two sessions later
04/02/03… S&P500 -0.2% two sessions later
In 27 out of the last 30 occurrences, or 90% of the time, the S&P500 closed lower 2-4 sessions later, significantly above the 62% random odds for a lower S&P 2-4 sessions later in the same period of time. The signal could also be viewed strictly as a two or three-day signal, again with a statistically significant edge vs. random.
One other point worth mentioning is that the S&P posted a higher high today following Thursday’s 90% up volume session. Historically, when the S&P500 can post two consecutive higher highs immediately after a 90%+ up volume session, the second higher high is usually a short-term buy. The persistent strength in the days following a heavily lopsided session signals buyers aren’t backing down, and the S&P has a good track record (28/32 since 1970) of closing above the first day’s high either the same day or the next.
Buy the S&P on the Second Higher High after 90%+ Up Volume
Buy 12/03/10 @ 1221.89… S&P close +0.1% same day
Buy 09/28/10 @ 1149.92… S&P close -0.5% next day
Buy 09/03/10 @ 1090.10… S&P close +1.3% same day
Buy 07/26/10 @ 1103.73… S&P close +1.0% same day
Buy 07/09/10 @ 1071.25… S&P close +0.6% same day
Buy 06/14/10 @ 1092.25… S&P close +2.1% next day
Buy 05/12/10 @ 1170.48… S&P close +0.1% same day
Buy 03/09/10 @ 1141.05… S&P close +0.4% next day
Buy 02/18/10 @ 1101.03… S&P close +0.5% same day
Buy 11/11/09 @ 1096.42… S&P close +0.2% same day
Buy 08/25/09 @ 1035.82… S&P close -0.7% next day
Buy 07/15/09 @ 905.84… S&P close +3.0% same day
Buy 05/20/09 @ 916.39… S&P close -3.1% next day
Buy 03/25/09 @ 823.65… S&P close +1.1% next day
Buy 03/19/09 @ 803.04… S&P close -4.3% next day
Buy 03/16/09 @ 758.29… S&P close +2.6% next day
Buy 03/12/09 @ 731.92… S&P close +2.6% same day
Buy 01/02/09 @ 910.32… S&P close +2.4% same day
Buy 11/26/08 @ 868.94… S&P close +2.2% same day
Buy 11/30/07 @ 1473.81… S&P close +0.5% same day
Buy 08/31/07 @ 1468.43… S&P close +0.4% same day
Buy 08/21/07 @ 1451.75… S&P close +0.9% next day
Buy 03/08/07 @ 1401.16… S&P close +0.1% same day
Buy 07/03/06 @ 1276.30… S&P close +0.3% same day
Buy 04/20/06 @ 1310.39… S&P close +0.1% same day
Buy 03/19/03 @ 866.94… S&P close +0.8% same day
Buy 01/06/03 @ 911.25… S&P close +2.0% same day
Buy 07/31/02 @ 909.81… S&P close +0.2% same day
Buy 11/02/87 @ 254.04… S&P close +0.7% same day
Buy 01/07/87 @ 253.99… S&P close +0.5% same day
Buy 08/24/82 @ 116.09… S&P close +1.3% next day
Buy 05/29/70 @ 75.44… S&P close +1.5% same day
This signal will go into effect on Monday if the SPX can trade above today’s high (currently 1189.04). If this signal is triggered, traders may want to let it play out before expecting sellers to gain the upper hand in the Tuesday-Thursday time frame.
When the SPX Quickly Recoups a Large Selloff
By Rennie on Friday, August 12th, 2011 at 1:02 pmAs long as the S&P500 closes above 1172.53 today, the index will have recouped the entire 4.4% loss posted Wednesday. When stocks quickly recoup a large selloff, buyers are often exhausted for the short-term and sellers usually gain the upper hand. Here’s a look at each of the last 30 instances in which the S&P500 closed down in excess of 1.5% and then recouped that entire loss over the next two sessions. The date shown in the table below is the date when the market recouped the loss from two sessions ago. Notice the consistent tendency for selling pressure to re-emerge over the next 2-4 sessions…
S&P500 Closes Down 1.5%+, Recoups Entire Loss Two Sessions Later
03/03/11… S&P500 -1.6% two sessions later
02/01/11… S&P500 -0.0% two sessions later
06/03/10… S&P500 -4.8% two sessions later
05/11/10… S&P500 -1.7% three sessions later
05/29/09… S&P500 +2.5% four sessions later (*)
05/26/09… S&P500 -0.4% two sessions later
04/16/09… S&P500 -3.8% two sessions later
04/09/09… S&P500 -1.8% two sessions later
03/26/09… S&P500 -5.4% two sessions later
03/24/09… S&P500 -2.3% four sessions later
12/08/08… S&P500 -1.2% two sessions later
11/24/08… S&P500 -4.2% four sessions later
10/28/08… S&P500 +2.7% four sessions later (*)
10/13/08… S&P500 -9.5% two sessions later
09/25/08… S&P500 -8.5% two sessions later
09/19/08… S&P500 -5.3% two sessions later
08/11/08… S&P500 -1.5% two sessions later
07/30/08… S&P500 -1.9% two sessions later
06/13/08… S&P500 -0.7% two sessions later
03/24/08… S&P500 -0.7% two sessions later
03/18/08… S&P500 -0.1% two sessions later
03/12/08… S&P500 -1.6% two sessions later
01/29/08… S&P500 +1.4% four sessions later (*)
01/10/08… S&P500 -0.3% two sessions later
11/28/07… S&P500 -0.4% four sessions later
08/07/07… S&P500 -1.6% two sessions later
06/01/06… S&P500 -1.6% two sessions later
10/24/05… S&P500 -0.7% two sessions later
04/22/04… S&P500 -0.4% two sessions later
04/02/03… S&P500 -0.2% two sessions later
In 27 out of the last 30 occurrences, or 90% of the time, the S&P500 closed lower 2-4 sessions later, significantly above the 62% random odds for a lower S&P 2-4 sessions later in the same period of time. The signal could also be viewed strictly as a two or three-day signal, again with a statistically significant edge vs. random.
One other point worth mentioning is that the S&P posted a higher high today following Thursday’s 90% up volume session. Historically, when the S&P500 can post two consecutive higher highs immediately after a 90%+ up volume session, the second higher high is usually a short-term buy. The persistent strength in the days following a heavily lopsided session signals buyers aren’t backing down, and the S&P has a good track record (28/32 since 1970) of closing above the first day’s high either the same day or the next.
Buy the S&P on the Second Higher High after 90%+ Up Volume
Buy 12/03/10 @ 1221.89… S&P close +0.1% same day
Buy 09/28/10 @ 1149.92… S&P close -0.5% next day
Buy 09/03/10 @ 1090.10… S&P close +1.3% same day
Buy 07/26/10 @ 1103.73… S&P close +1.0% same day
Buy 07/09/10 @ 1071.25… S&P close +0.6% same day
Buy 06/14/10 @ 1092.25… S&P close +2.1% next day
Buy 05/12/10 @ 1170.48… S&P close +0.1% same day
Buy 03/09/10 @ 1141.05… S&P close +0.4% next day
Buy 02/18/10 @ 1101.03… S&P close +0.5% same day
Buy 11/11/09 @ 1096.42… S&P close +0.2% same day
Buy 08/25/09 @ 1035.82… S&P close -0.7% next day
Buy 07/15/09 @ 905.84… S&P close +3.0% same day
Buy 05/20/09 @ 916.39… S&P close -3.1% next day
Buy 03/25/09 @ 823.65… S&P close +1.1% next day
Buy 03/19/09 @ 803.04… S&P close -4.3% next day
Buy 03/16/09 @ 758.29… S&P close +2.6% next day
Buy 03/12/09 @ 731.92… S&P close +2.6% same day
Buy 01/02/09 @ 910.32… S&P close +2.4% same day
Buy 11/26/08 @ 868.94… S&P close +2.2% same day
Buy 11/30/07 @ 1473.81… S&P close +0.5% same day
Buy 08/31/07 @ 1468.43… S&P close +0.4% same day
Buy 08/21/07 @ 1451.75… S&P close +0.9% next day
Buy 03/08/07 @ 1401.16… S&P close +0.1% same day
Buy 07/03/06 @ 1276.30… S&P close +0.3% same day
Buy 04/20/06 @ 1310.39… S&P close +0.1% same day
Buy 03/19/03 @ 866.94… S&P close +0.8% same day
Buy 01/06/03 @ 911.25… S&P close +2.0% same day
Buy 07/31/02 @ 909.81… S&P close +0.2% same day
Buy 11/02/87 @ 254.04… S&P close +0.7% same day
Buy 01/07/87 @ 253.99… S&P close +0.5% same day
Buy 08/24/82 @ 116.09… S&P close +1.3% next day
Buy 05/29/70 @ 75.44… S&P close +1.5% same day
This signal will go into effect on Monday if the SPX can trade above today’s high (currently 1189.04). If this signal is triggered, traders may want to let it play out before expecting sellers to gain the upper hand in the Tuesday-Thursday time frame.