Post-Expiration Selloff

Mixed signals for Tuesday, potential for a short-term rally heading into Thursday…

Positive for Tuesday is that we’re coming off a string of five consecutive up days for the S&P500. Historically, the first down day after five or more up days tends to precede a bounce the following session. The last 30 occurrences are shown below…

First down day after a series of five or more up days
07/05/11… S&P500 +0.1% next day
01/28/11… S&P500 +0.8% next day
12/23/10… S&P500 +0.1% next day
12/15/10… S&P500 +0.6% next day
11/08/10… S&P500 -0.8% next day
10/27/10… S&P500 +0.1% next day
07/14/10… S&P500 +0.1% next day
04/16/10… S&P500 +0.5% next day
03/08/10… S&P500 +0.2% next day
01/12/10… S&P500 +0.8% next day
12/29/09… S&P500 +0.0% next day
11/10/09… S&P500 +0.5% next day
10/13/09… S&P500 +1.8% next day
09/11/09… S&P500 +0.6% next day
12/01/08… S&P500 +4.0% next day
07/10/07… S&P500 +0.6% next day
06/05/07… S&P500 -0.9% next day
05/08/07… S&P500 +0.3% next day
04/19/07… S&P500 +0.9% next day
04/11/07… S&P500 +0.6% next day
11/20/06… S&P500 +0.2% next day
10/27/06… S&P500 +0.0% next day
08/21/06… S&P500 +0.1% next day
03/20/06… S&P500 -0.6% next day
01/10/06… S&P500 +0.4% next day
11/28/05… S&P500 +0.0% next day
10/03/05… S&P500 -1.0% next day
07/18/05… S&P500 +0.7% next day
06/20/05… S&P500 -0.2% next day
02/17/05… S&P500 +0.1% next day

In 23 out of the last 30 occurrences, or 77% of the time the S&P closed higher the next day, significantly above the 55% random chance for a higher SPX close one day later in the same time frame.

Negative for Tuesday is the fact that S&P futures are currently trading near session highs despite 2:1 negative breadth on the NYSE. When the S&Ps settle above the day’s midpoint on a lopsided negative breadth session, there’s a tendency for lower prices the following session…

S&P Futures Close >Midpoint Despite 2:1 Negative Breadth
09/06/11… S&P futures +3.0% next session
08/16/11… S&P futures -0.2% next session
08/05/11… S&P futures -7.2% next session
07/29/11… S&P futures -0.9% next session
07/18/11… S&P futures +1.6% next session
07/08/11… S&P futures -1.7% next session
04/18/11… S&P futures +0.6% next session
03/15/11… S&P futures -1.7% next session
03/14/11… S&P futures -1.2% next session
08/10/10… S&P futures -3.1% next session
05/06/10… S&P futures -1.4% next session
01/20/10… S&P futures -2.0% next session
01/12/10… S&P futures +0.7% next session
11/27/09… S&P futures +0.5% next session
11/19/09… S&P futures -0.4% next session
08/31/09… S&P futures -2.3% next session
08/14/09… S&P futures -2.7% next session
06/03/09… S&P futures +0.9% next session
05/21/09… S&P futures -0.4% next session
04/06/09… S&P futures -2.0% next session
03/27/09… S&P futures -3.9% next session
02/20/09… S&P futures -3.2% next session
01/22/09… S&P futures -0.2% next session
12/22/08… S&P futures -1.5% next session
12/15/08… S&P futures +4.6% next session
10/22/08… S&P futures +1.4% next session
10/06/08… S&P futures -4.5% next session
09/26/08… S&P futures -7.9% next session
04/22/08… S&P futures -0.2% next session
03/17/08… S&P futures +4.3% next session

In 21 out of the last 30 occurrences, or 70% of the time, S&P futures closed lower the following session, significantly higher than the 44% random chance in the same time frame.

Looking out later in the week, it’s noteworthy that a selloff immediately following options expiration tends to precede a bounce over the next few sessions. The table below highlights the last 30 instances in which the S&P500 closed down in excess of 0.5% on the session immediately following options expiration. In 25 of the last 30 occurrences, or 83% of the time, the S&P closed higher three sessions later, significantly above the 56% random chance…

S&P500 Falls 0.5%+ Day Following Options Expiration
07/18/11… S&P500 +2.9% three sessions later
05/23/11… S&P500 +0.6% three sessions later
04/18/11… S&P500 +2.5% three sessions later
02/22/11… S&P500 +0.3% three sessions later
05/24/10… S&P500 +2.7% three sessions later
06/22/09… S&P500 +3.1% three sessions later
04/20/09… S&P500 +2.4% three sessions later
02/23/09… S&P500 +1.3% three sessions later
01/20/09… S&P500 +3.3% three sessions later
12/22/08… S&P500 +0.1% three sessions later
09/22/08… S&P500 +0.2% three sessions later
08/18/08… S&P500 -0.1% three sessions later
01/22/08… S&P500 +1.5% three sessions later
11/19/07… S&P500 +0.5% three sessions later
09/24/07… S&P500 +0.9% three sessions later
01/22/07… S&P500 +0.1% three sessions later
06/19/06… S&P500 +0.4% three sessions later
12/19/05… S&P500 +0.7% three sessions later
09/19/05… S&P500 -1.3% three sessions later
07/18/05… S&P500 +0.5% three sessions later
02/22/05… S&P500 +2.3% three sessions later
09/20/04… S&P500 -1.2% three sessions later
03/22/04… S&P500 +1.3% three sessions later
09/22/03… S&P500 -1.9% three sessions later
07/21/03… S&P500 +0.3% three sessions later
06/23/03… S&P500 +0.4% three sessions later
05/19/03… S&P500 +1.2% three sessions later
03/24/03… S&P500 +0.5% three sessions later
02/24/03… S&P500 +0.6% three sessions later
01/21/03… S&P500 -3.0% three sessions later

Categories : Archived Intraday Commentary, Intraday Commentary

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