Tuesday’s market internals were massively lopsided, with upside volume on the NYSE coming in over 30 times downside volume. That’s a pretty outrageous ratio, topped only by the fact that Tuesday was the FIFTH 30:1 up:down volume day in 2011. We saw a couple 30:1 days in 2010 and one in ’09, but zero in the years prior.

When the S&P manages to continue moving higher immediately after a 20:1 up:down volume day, meaning it posts a higher high (as it did Wednesday), there’s usually further upside in store over the short-term. This pattern has occurred 21 times since 1960, all of which are listed below along with the performance of the S&P over the next two sessions. Note only one instance led to any significant weakness (1%+) looking out two trading days, suggesting the S&P will be trading at a similar level or higher at Friday’s close…

SPX Posts Higher High After 20:1 Up/Down Volume Day
12/21/11… S&P500 ???  two sessions later
12/01/11… S&P500 +1.0% two sessions later
11/29/11… S&P500 +4.1% two sessions later
08/30/11… S&P500 -0.7% two sessions later
08/12/11… S&P500 +1.2% two sessions later
09/02/10… S&P500 +0.2% two sessions later
07/08/10… S&P500 +0.8% two sessions later
06/16/10… S&P500 +0.3% two sessions later
06/11/10… S&P500 +2.2% two sessions later
06/03/10… S&P500 -4.8% two sessions later (*)
05/11/10… S&P500 +0.1% two sessions later
07/16/09… S&P500 +1.1% two sessions later
03/24/09… S&P500 +3.3% two sessions later
03/11/09… S&P500 +4.9% two sessions later
11/29/07… S&P500 +0.2% two sessions later
09/19/07… S&P500 -0.2% two sessions later
08/30/07… S&P500 +2.2% two sessions later
05/14/90… S&P500 -0.2% two sessions later
01/05/87… S&P500 +1.3% two sessions later
08/23/82… S&P500 +1.3% two sessions later
08/18/82… S&P500 +4.1% two sessions later
06/29/62… S&P500 +3.2% two sessions later

QQQ volume came in over two standard deviations above its 20-day moving average Tuesday (aka upper bollinger band). It’s usually an intermediate-term bullish indication when price makes a higher high, low and close on statistically significant volume. Every occurrence for QQQ since 1995 is listed below along with performance over the next ten trading days…

QQQ Higher High, Low & Close, Volume Over Upper Band
12/20/11… QQQ ??? two weeks later
01/03/11… QQQ +3.3% two weeks later
04/24/08… QQQ +2.4% two weeks later
10/27/04… QQQ +2.9% two weeks later
03/13/03… QQQ +2.9% two weeks later
11/13/02… QQQ +10.6% two weeks later
10/11/02… QQQ +10.8% two weeks later
05/08/02… QQQ -1.2% two weeks later
10/03/01… QQQ +4.7% two weeks later
04/18/01… QQQ +7.5% two weeks later
02/24/00… QQQ +8.0% two weeks later
06/30/99… QQQ +5.5% two weeks later
01/06/99… QQQ -0.1% two weeks later
06/24/98… QQQ +3.9% two weeks later
06/17/98… QQQ +10.8% two weeks later
04/22/98… QQQ -3.8% two weeks later (*)
04/02/98… QQQ +0.1% two weeks later
07/16/97… QQQ -0.3% two weeks later
07/09/97… QQQ +8.2% two weeks later
05/02/97… QQQ +0.7% two weeks later
04/04/97… QQQ -0.7% two weeks later
11/07/96… QQQ +0.6% two weeks later
09/12/96… QQQ +8.5% two weeks later
04/23/96… QQQ +1.0% two weeks later
04/16/96… QQQ +6.5% two weeks later
04/09/96… QQQ +7.1% two weeks later
02/03/95… QQQ +2.3% two weeks later

26 occurrences

5 selloffs, only 1 in excess of 1.2%

21 rallies (81%) vs. 57% random odds

average gain 5.2%

Volume associated with declining issues accounted for 90% of total NYSE volume, making the third 90% down volume day just this month. That’s extremely unusual considering we’ve never seen more than one 90% down volume day in December in the last fifty years. Clearly this is not your typical year. I don’t see much in the way of confirming evidence that a buying opportunity is at hand, but I will continue to watch for such evidence given that the S&P just posted its first down week in December. The table below lists each instance since 1970 in which the S&P posted its first lower bar on the weekly chart during the month of December (no signals were triggered in 1971, 1991, 2003 or 2010 as there were no down weeks.) Note that in every case but one, the S&P posted a higher weekly close within six weeks and usually within three…

S&P500 Posts its First Down Week in December
12/16/11 Buy SPX 1219.66… ???
No Down Weeks in Dec 2010
12/18/09 Buy SPX 1102.47… +2.2% one week later
12/05/08 Buy SPX 876.07… +0.4% one week later
12/14/07 Buy SPX 1467.95… +1.1% one week later
12/01/06 Buy SPX 1396.72… +0.9% one week later
12/02/05 Buy SPX 1265.08… +0.2% two weeks later
12/10/04 Buy SPX 1188.00… +0.5% one week later
No Down Weeks in Dec 2003
12/06/02 Buy SPX 912.23… +1.7% five weeks later
12/14/01 Buy SPX 1123.07… +1.9% one week later
12/01/00 Buy SPX 1315.18… +4.2% one week later
12/10/99 Buy SPX 1417.04… +0.3% one week later
12/04/98 Buy SPX 1176.46… +1.0% two weeks later
12/12/97 Buy SPX 953.39… +2.3% three weeks later
12/06/96 Buy SPX 739.60… +1.3% two weeks later
12/15/95 Buy SPX 616.34… +0.1% three weeks later
12/09/94 Buy SPX 446.97… +2.6% one week later
12/10/93 Buy SPX 463.93… +0.5% one week later
12/24/92 Buy SPX 439.77… +2.1% six weeks later
No Down Weeks in Dec 1991
12/14/90 Buy SPX 326.82… +1.5% one week later
12/08/89 Buy SPX 348.69… +0.4% one week later
12/16/88 Buy SPX 276.28… +0.6% one week later
12/04/87 Buy SPX 223.87… +5.1% one week later
12/12/86 Buy SPX 247.35… +1.0% one week later
12/27/85 Buy SPX 209.61… +0.6% one week later
12/07/84 Buy SPX 162.26… +0.3% one week later
12/02/83 Buy SPX 165.44… +2.3% five weeks later
12/17/82 Buy SPX 137.49… +1.6% one week later
12/11/81 Buy SPX 124.93… -7.6% six weeks later (*)
12/05/80 Buy SPX 134.03… +1.9% three weeks later
12/21/79 Buy SPX 107.59… +0.2% one week later
12/15/78 Buy SPX 95.33… +1.0% one week later
12/02/77 Buy SPX 94.67… +0.0% three weeks later
12/03/76 Buy SPX 102.76… +1.9% one week later
12/05/75 Buy SPX 86.82… +1.2% one week later
12/06/74 Buy SPX 65.01…  +3.2% one week later
12/14/73 Buy SPX 93.29… +0.3% one week later
12/15/72 Buy SPX 118.26… +1.4% three weeks later
No Down Weeks in Dec 1971
12/18/70 Buy SPX 90.22… +0.4% one week later

The monthly moving average strategy remained on a buy last month (just barely) after the S&P soared on the last day of November. Most other long-term indications remain bearish (see recent big picture review), so it would be worrisome if price can’t hold that average (at SPX 1217) this month.

I also see the High-Low Logic buy signal triggered early October was closed out Monday after the 50-day moving average of the indicator rose above 1%.

Pre-FOMC selloffs have been pretty reliable buy points for a 1-2 day trade. Over the last 30 occurrences stretching back to the early 80′s, 26 (87%) led to a close above the setup day’s close either on the day of the Fed announcement or the following session vs. 66% random odds…

S&P Down 1%+ Day Before FOMC Announcement
12/12/11… S&P500 ???
11/01/11… S&P500 +1.6% one session later
08/08/11… S&P500 +4.7% one session later
06/22/10… S&P500 -2.0% two sessions later
04/27/10… S&P500 +0.7% one session later
08/11/09… S&P500 +1.2% one session later
12/15/08… S&P500 +5.1% one session later
09/15/08… S&P500 +1.8% one session later
03/15/04… S&P500 +0.6% one session later
12/09/02… S&P500 +1.4% one session later
09/23/02… S&P500 +0.7% two sessions later
06/25/02… S&P500 +1.5% two sessions later
05/06/02… S&P500 +3.4% two sessions later
01/29/02… S&P500 +1.2% one session later
12/10/01… S&P500 -0.3% two sessions later
12/16/96… S&P500 +0.7% one session later
12/18/95… S&P500 +0.8% one session later
08/19/91… S&P500 +0.8% one session later
04/29/91… S&P500 +0.5% one session later
12/18/89… S&P500 -0.3% two sessions later
08/21/89… S&P500 +0.2% one session later
08/15/88… S&P500 +0.7% one session later
09/21/87… S&P500 +2.9% one session later
03/30/87… S&P500 +0.9% one session later
02/10/87… S&P500 +0.9% one session later
07/08/86… S&P500 +0.5% one session later
07/12/83… S&P500 +0.3% two sessions later
11/15/82… S&P500 +0.7% two sessions later
05/17/82… S&P500 -1.6% two sessions later
02/01/82… S&P500 +0.2% one session later
11/16/81… S&P500 +0.8% one session later

Also worth noting the low volume and narrow ranges. NDX posted an NR10 day, which has positive implications coming on a 3:1 negative breadth day. All 20 occurrences since 1990…

NDX NR10 Day & 2:1 Negative Breadth on NASDAQ
12/12/11… NDX ??? three sessions later
11/14/11… NDX -3.0% three sessions later
10/07/11… NDX +4.7% three sessions later
09/02/11… NDX +2.1% three sessions later
09/07/10… NDX +1.9% three sessions later
08/13/10… NDX +1.8% three sessions later
03/24/10… NDX +0.5% three sessions later
11/10/09… NDX +0.9% three sessions later
08/31/09… NDX -1.2% three sessions later
03/27/09… NDX +0.1% three sessions later
10/27/08… NDX +14.0% three sessions later
05/23/08… NDX +3.1% three sessions later
08/11/06… NDX +5.6% three sessions later
07/21/06… NDX +2.5% three sessions later
10/18/05… NDX +1.7% three sessions later
05/10/04… NDX +1.4% three sessions later
04/06/04… NDX +0.2% three sessions later
12/13/02… NDX +0.8% three sessions later
09/05/02… NDX +7.3% three sessions later
08/03/98… NDX -0.2% three sessions later
01/21/92… NDX +5.3% three sessions later

NYSE consolidated volume totaled 3.6 billion Monday, the lowest in over ten trading days. That’s the fourth time this year we’ve seen a 90%+ down volume day coincide with a 5-day low in total NYSE volume…

90%+ Down Volume on NYSE, Total Volume @ 5-day Low
12/12/11… SPX ??? two weeks later
10/31/11… SPX -0.1% two weeks later
09/28/11… SPX +4.9% two weeks later
06/06/11… SPX -0.6% two weeks later
08/30/10… SPX +6.9% two weeks later
11/27/09… SPX +1.4% two weeks later
07/02/09… SPX +4.9% two weeks later
10/15/08… SPX +2.5% two weeks later
03/24/03… SPX +1.8% two weeks later

The S&P500 started out December with back-to-back down days. Whenever this occurs, note the previous month’s settlement. If the SPX closes back over that level before the end of the month (as it did today), it’s usually a reliable one-week buy signal. The table below illustrates this point. The first date shown is the second session of the month when the S&P closed lower for the second day in a row. The second date is when the S&P closed back above the previous month’s settlement and the number of sessions elapsed. For instance, using the signal just triggered, the S&P closed lower two consecutive sessions at the start of the month on December 2nd. One day later, on 12/5/11, the S&P erased that loss by closing above the prior month’s close. That’s the trigger date, which points to an S&P above today’s close on Monday, December 12th…

SPX Starts Month w/ Two Down Days, Before End of Month S&P Closes > Prev Month’s Settlement
12/02/11… 12/05/11 (1)… S&P500 ??? one week later
07/02/10… 07/07/10 (2)… S&P500 +3.3% one week later
10/02/09… 10/07/09 (3)… S&P500 +3.3% one week later
09/02/09… 09/08/09 (3)… S&P500 +2.7% one week later
03/03/09… 03/12/09 (7)… S&P500 +4.4% one week later
08/04/08… 08/05/08 (1)… S&P500 +0.4% one week later
06/03/08… 06/05/08 (2)… S&P500 -4.6% one week later (*)
12/04/07… 12/05/07 (1)… S&P500 +0.1% one week later
03/02/07… 03/20/07 (12)… S&P500 +1.3% one week later
11/02/06… 11/06/06 (2)… S&P500 +0.3% one week later
03/04/03… 03/17/03 (9)… S&P500 +0.2% one week later
08/02/02… 08/14/02 (8)… S&P500 +3.2% one week later
04/03/01… 04/10/01 (5)… S&P500 +6.0% one week later
11/02/99… 11/05/99 (3)… S&P500 +1.9% one week later
08/03/99… 08/16/99 (9)… S&P500 +2.2% one week later
03/02/99… 03/04/99 (2)… S&P500 +4.1% one week later
06/03/97… 06/06/97 (3)… S&P500 +4.1% one week later
03/02/95… 03/10/95 (6)… S&P500 +1.2% one week later
10/04/94… 10/11/94 (5)… S&P500 +0.4% one week later
01/05/93… 01/14/93 (7)… S&P500 -0.1% one week later
12/02/92… 12/04/92 (2)… S&P500 +0.4% one week later
10/02/92… 10/26/92 (16)… S&P500 +1.1% one week later
11/04/91… 11/07/91 (3)… S&P500 +0.9% one week later
01/03/91… 01/18/91 (11)… S&P500 +1.2% one week later
05/02/89… 05/12/89 (8)… S&P500 +2.4% one week later
02/02/89… 02/07/89 (3)… S&P500 -2.6% one week later (*)
12/02/88… 12/05/88 (1)… S&P500 +0.6% one week later
10/04/88… 10/06/88 (2)… S&P500 +1.0% one week later
08/04/87… 08/06/87 (2)… S&P500 +3.9% one week later
06/02/87… 06/03/87 (1)… S&P500 +1.4% one week later
05/02/86… 05/05/86 (1)… S&P500 -0.1% one week later

The S&P was higher one week after this pattern in 26 out of the last 30 occurrences, or 87% of the time, significantly above the 57% random chance for a higher S&P one week later. Average gain was 2%. This is directly in conflict with a study posted last Friday involving a divergence with 52-week highs. Interestingly, that divergence is still in effect even with today’s solid rally as 52-week highs among NYSE common stocks stands at 65 vs. 67 last Thursday.