S&P Taking Back Monday’s Loss, Maybe a Little Too Quickly
By
Rennie on Wednesday, October 5th, 2011 at 2:22 pm
The S&P is currently trading up 1% at 1135. Should we see a close above SPX 1131.42 today, it would trigger a short-term 2-4 day sell signal. The reasoning is that on Monday, the S&P fell nearly 3%. When the market drops hard (>1.5%) and then quickly takes back that loss over the next two sessions, buying power is usually exhausted for the short-term. The table below lists every instance since 2005 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
08/29/11… S&P500 -0.5% three sessions later
08/23/11… S&P500 -0.3% two sessions later
08/12/11… S&P500 -3.2% four 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
In 28 out of 31 occurrences, or 90% of the time, the S&P500 closed lower (below the setup day’s close) 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.
S&P Taking Back Monday’s Loss, Maybe a Little Too Quickly
By Rennie on Wednesday, October 5th, 2011 at 2:22 pmThe S&P is currently trading up 1% at 1135. Should we see a close above SPX 1131.42 today, it would trigger a short-term 2-4 day sell signal. The reasoning is that on Monday, the S&P fell nearly 3%. When the market drops hard (>1.5%) and then quickly takes back that loss over the next two sessions, buying power is usually exhausted for the short-term. The table below lists every instance since 2005 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
08/29/11… S&P500 -0.5% three sessions later
08/23/11… S&P500 -0.3% two sessions later
08/12/11… S&P500 -3.2% four 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
In 28 out of 31 occurrences, or 90% of the time, the S&P500 closed lower (below the setup day’s close) 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.