S&P Futures Threaten a Second Downside Gap

S&P futures posted an unfilled downside gap on Friday (high < previous day’s low) and Sunday evening futures are down another 1%, currently trading just below Friday’s low and threatening a second consecutive unfilled downside gap. Recent attempts at posting back-to-back downside gaps have not proven successful (for bears). In the table below is every instance since 1990 in which S&P futures opened below the previous day’s low (threatening a downside gap) immediately following a session with an unfilled downside gap (high < previous day’s low)…

S&P Futures Open < Previous Day’s Low Following Unfilled Downside Gap
09/06/11… S&P futures close +2.1% from open
08/19/11… S&P futures close +0.0% from open
07/11/11… S&P futures close -0.3% from open
03/11/11… S&P futures close +1.2% from open
08/25/10… S&P futures close +1.0% from open
08/12/10… S&P futures close +0.8% from open
05/21/10… S&P futures close +3.1% from open
05/05/10… S&P futures close +0.3% from open
07/06/09… S&P futures close +1.2% from open
04/21/09… S&P futures close +2.9% from open
01/08/09… S&P futures close +0.9% from open
01/16/08… S&P futures close -0.3% from open
07/11/07… S&P futures close +0.9% from open
09/07/06… S&P futures close -0.1% from open
10/23/03… S&P futures close +0.5% from open
09/24/02… S&P futures close -0.1% from open
09/13/02… S&P futures close +1.2% from open
08/29/02… S&P futures close +0.9% from open
07/22/02… S&P futures close -2.2% from open (*)
06/15/01… S&P futures close +0.7% from open
03/12/01… S&P futures close -3.3% from open (*)
12/21/00… S&P futures close +0.9% from open
05/17/99… S&P futures close +0.5% from open
10/10/95… S&P futures close +0.8% from open
09/17/90… S&P futures close +1.1% from open
08/17/90… S&P futures close -0.6% from open
02/21/90… S&P futures close +1.1% from open

This second gap down doesn’t usually see much intraday follow-through. 14 of the last 18 occurrences led to a close above the open, and the largest open-to-close loss was 0.3%. Over 27 occurrences since 1990, 20 (74%) led to a close above the open, a decent edge over the 53% random chance. The two largest losses both exceeded 2%, so when it’s wrong it’s really wrong.

Overall indications continue to suggest a difficult time for stocks. To briefly summarize some recently discussed indicators…

Large traders in E-Mini S&P futures are heavily short.

Last Hour is ramping higher as it retraces the prior move down, suggesting more ugly opens and general market weakness until the retracement is complete.

The large cluster of lopsided breadth days continues to expand.

The Market Vane survey of commodity trading advisors is back at its lows for the year.

Cumulative TICKscore has been unable to sustain higher highs.

I’d also note that this coming Friday is triple witching expiration, which from a seasonal perspective ushers in a challenging time for stocks through the end of September. Stocks are already under seasonal pressure from the post-Labor Day selloff, so this adds another headwind beginning next week. The table below highlights the S&P500′s performance from the close on triple witching  through the last trading day of September for every year since 1980…

S&P Performance from Sep Expiry until End of Month
09/17/10 – 09/30/10… S&P500 +1.4%
09/18/09 – 09/30/09… S&P500 -1.1%
09/19/08 – 09/30/08… S&P500 -7.1%
09/21/07 – 09/28/07… S&P500 +0.1%
09/15/06 – 09/29/06… S&P500 +1.2%
09/16/05 – 09/30/05… S&P500 -0.7%
09/17/04 – 09/30/04… S&P500 -1.2%
09/19/03 – 09/30/03… S&P500 -3.8%
09/20/02 – 09/30/02… S&P500 -3.6%
09/21/01 – 09/28/01… S&P500 +7.8% (*)
09/15/00 – 09/29/00… S&P500 -2.0%
09/17/99 – 09/30/99… S&P500 -3.9%
09/18/98 – 09/30/98… S&P500 -0.3%
09/19/97 – 09/30/97… S&P500 -0.3%
09/20/96 – 09/30/96… S&P500 +0.1%
09/15/95 – 09/29/95… S&P500 +0.2%
09/16/94 – 09/30/94… S&P500 -1.8%
09/17/93 – 09/30/93… S&P500 +0.0%
09/18/92 – 09/30/92… S&P500 -1.2%
09/20/91 – 09/30/91… S&P500 -0.0%
09/21/90 – 09/28/90… S&P500 -1.7%
09/15/89 – 09/29/89… S&P500 +1.2%
09/16/88 – 09/30/88… S&P500 +0.5%
09/18/87 – 09/30/87… S&P500 +2.2%
09/19/86 – 09/30/86… S&P500 -0.4%
09/20/85 – 09/30/85… S&P500 +0.0%
09/21/84 – 09/28/84… S&P500 +0.2%
09/16/83 – 09/30/83… S&P500 -0.0%
09/17/82 – 09/30/82… S&P500 -1.7%
09/18/81 – 09/30/81… S&P500 -0.0%
09/19/80 – 09/30/80… S&P500 -2.9%

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

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