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On Friday, SPY posted an unfilled downside gap (high < prev low). Today we’re seeing follow-through selling pressure, with the SPY posting a lower high and lower low and currently off 1.7%. Assuming SPY closes today down at least 0.5%, it would suggest further short-term pressure heading into Wednesday-Thursday. Below are the last 30 occurrences of this pattern, along with the performance of the Nasdaq100 (NDX) over the next 2-3 days (the NDX had a more reliably negative track record compared to the S&P.) Over 30 occurrences, 24 (80%) led to a lower NDX 2-3 sessions later, a solid edge over the 53% random odds.

SPY -0.5%, Lower High & Low Following
Unfilled Downside Gap
12/20/21… NDX ???
05/12/21… NDX +2.4% three sessions later
09/18/20… NDX -1.0% three sessions later
03/09/20… NDX -8.6% three sessions later
02/25/20… NDX -4.5% two sessions later
12/17/18… NDX -1.6% two sessions later
10/05/18… NDX -0.4% two sessions later
03/23/18… NDX -0.7% three sessions later
02/05/18… NDX -2.8% three sessions later
06/13/16… NDX -0.3% two sessions later
01/08/16… NDX -2.1% three sessions later
11/13/15… NDX +3.4% three sessions later
01/24/14… NDX -1.1% two sessions later
11/08/12… NDX -0.4% three sessions later
07/23/12… NDX -1.6% two sessions later
08/12/10… NDX -0.6% two sessions later
06/07/10… NDX -1.1% two sessions later
05/05/10… NDX -5.6% two sessions later
10/07/08… NDX -4.1% two sessions later
06/03/08… NDX -0.3% three sessions later
02/06/08… NDX +3.0% three sessions later
09/07/06… NDX +3.3% three sessions later
01/21/05… NDX -0.9% two sessions later
09/23/04… NDX -1.4% two sessions later
07/22/02… NDX -4.8% three sessions later
03/12/01… NDX +1.0% three sessions later
02/20/01… NDX -3.0% two sessions later
07/19/00… NDX -1.4% three sessions later
05/22/00… NDX -2.6% two sessions later
08/30/96… NDX -1.7% three sessions later
12/18/95… NDX +6.0% three sessions later

This is in opposition to the bullish SPX/NDX signal triggered Friday, suggesting one of these will be wrong or we’ll see a short-term rally Tuesday-Wednesday followed by another push lower Thursday.

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