Post-Expiration – MarketTells.com

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One thing to watch out for near-term is a close below Friday’s S&P low. It’s just below Friday’s close, and if we break that low on a closing basis it would represent a short-term red flag. The reasoning is that last Thursday and Friday SPY closed lower on volume that exceeded the upper bollinger band. When two high-volume down days don’t bring a halt to a decline, it can precede a quick and significant move lower. The trigger for the warning occurs if SPY closes below the low of the second volume spike within three sessions, which in this case means a SPY close below 414.70 by Wednesday. Of the 18 prior occurrences of this pattern since SPY’s inception, 11 (61%) led to a 2.5%+ drawdown within the next two sessions. That’s a big edge over the 13% random odds for this sort of decline over any two-day period…

SPY Down, Volume > Upper Band 2x Last Three Days
SPY Closes Below Low of 2nd Volume Spike Within Three Days
09/08/20… SPY -0.1% intraday two sessions later
02/25/20… SPY -4.8% intraday two sessions later *
08/02/19… SPY -3.7% intraday next session
12/21/18… SPY -2.9% intraday two sessions later *
02/08/18… SPY -1.9% intraday next session
08/21/15… SPY -8.3% intraday next session *
12/15/14… SPY -0.8% intraday next session
10/13/14… SPY -3.1% intraday two sessions later
04/18/13… SPY -0.0% intraday next session *
05/14/12… SPY -1.1% intraday two sessions later
08/02/11… SPY -4.8% intraday two sessions later
01/21/10… SPY -2.6% intraday next session
10/02/09… SPY -0.0% intraday next session
03/05/07… SPY -0.0% intraday next session
09/20/01… SPY -5.6% intraday next session *
09/06/01… SPY -3.1% intraday two sessions later
04/15/99… SPY -3.5% intraday two sessions later *
08/31/98… SPY -2.8% intraday next session

The proximity to options expiration is a concern. I’ve added an asterisk (*) next to those occasions that were within one day of monthly options expieration. 5 of those 6 occurrences represented some of the sharpest short-term selloffs. But again, this won’t activate unless we close below Friday’s low.

Two conflicting signals looking out to early July…

On Wednesday and Friday we had over 400 declining issues among S&P500 components, yet new 52-week highs continue to outnumber new lows. That combination has a tendency to precede higher stock prices. Since 2007, 28 out of 30 occurrences (93%) led to a higher S&P500 either two weeks or one month later compared to 72% random odds. Average gain at the two-week mark was 3%, average loss 1.8%…

SPX 400+ Decliners, New 52wk Highs > Lows,
Second Occurrence in Three Sessions
06/18/21… SPX ???
05/12/21… SPX +3.3% in two weeks, +4.5% in one month
01/29/21… SPX +5.9% in two weeks, +4.2% in one month
06/26/20… SPX +4.9% in two weeks, +7.0% in one month
06/11/20… SPX +2.7% in two weeks, +5.1% in one month
04/21/20… SPX +4.8% in two weeks, +8.6% in one month
04/15/20… SPX +5.6% in two weeks, +2.5% in one month
01/27/20… SPX +3.3% in two weeks, -3.9% in one month
12/02/19… SPX +2.5% in two weeks, +4.6% in one month
03/07/19… SPX +3.9% in two weeks, +5.2% in one month
02/28/18… SPX +1.3% in two weeks, -2.7% in one month
06/13/16… SPX -3.8% in two weeks, +3.5% in one month
05/13/16… SPX +2.6% in two weeks, +1.4% in one month
04/07/16… SPX +2.4% in two weeks, +0.8% in one month
01/30/15… SPX +5.1% in two weeks, +5.7% in one month
01/05/15… SPX +0.1% in two weeks, +1.0% in one month
04/07/14… SPX +1.9% in two weeks, +1.8% in one month
10/07/13… SPX +4.1% in two weeks, +5.2% in one month
06/12/13… SPX -0.6% in two weeks, +4.2% in one month
04/17/13… SPX +2.0% in two weeks, +6.3% in one month
02/21/13… SPX +2.8% in two weeks, +3.6% in one month
12/26/12… SPX +3.7% in two weeks, +5.7% in one month
11/16/11… SPX +0.6% in two weeks, -1.4% in one month
10/19/11… SPX +2.3% in two weeks, +0.5% in one month
05/13/11… SPX -0.5% in two weeks, -3.7% in one month *
02/23/11… SPX +1.0% in two weeks, +0.2% in one month
11/26/10… SPX +4.3% in two weeks, +5.8% in one month
01/20/10… SPX -3.6% in two weeks, -2.5% in one month *
10/26/09… SPX +2.5% in two weeks, +3.6% in one month
09/24/09… SPX +1.4% in two weeks, +2.7% in one month
06/06/07… SPX -0.3% in two weeks, +0.9% in one month

The weekly S&P500 posted a 52-week high and a 1%+ down close, the first since February. Since 1998, this pattern has been a fairly consistent predictor of further downside two weeks later. Over 28 occurrences, the S&P was up 9 times (32%), down 19 ten sessions later. That’s significantly worse than the 59% random odds. Average loss was 2.4%, average gain 1.4%…

SPX 52wk High Intraweek, Closes Week Down 1%+
06/18/21… SPX ???
01/29/21… SPX +5.9% two weeks later
09/04/20… SPX -3.3% two weeks later
02/21/20… SPX -11.0% two weeks later
01/24/20… SPX +1.0% two weeks later
07/19/19… SPX -1.5% two weeks later
08/11/17… SPX +0.1% two weeks later
01/02/15… SPX -1.9% two weeks later
05/24/13… SPX -0.4% two weeks later
04/05/13… SPX +0.1% two weeks later
05/06/11… SPX -0.5% two weeks later
04/30/10… SPX -4.3% two weeks later
01/22/10… SPX -2.3% two weeks later
12/31/09… SPX +1.9% two weeks later
07/20/07… SPX -6.6% two weeks later
06/08/07… SPX -0.3% two weeks later
12/22/06… SPX -0.1% two weeks later
05/12/06… SPX -0.9% two weeks later
03/11/05… SPX -2.4% two weeks later
01/07/05… SPX -1.5% two weeks later
11/19/04… SPX +1.8% two weeks later
01/07/00… SPX -0.0% two weeks later
07/23/99… SPX -4.2% two weeks later
04/30/99… SPX +0.2% two weeks later
04/16/99… SPX +1.2% two weeks later
02/05/99… SPX -0.0% two weeks later
07/24/98… SPX -4.5% two weeks later
04/24/98… SPX +0.0% two weeks later
04/09/98… SPX -0.3% two weeks later