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Let’s start with the bad news. When the daily SPY posts two red candles (close<open) ahead of the employment report and then closes higher on the day of the report, that pre-report selling pressure tends to re-emerge. Over 27 occurrences since inception of SPY, the S&P500 was up only 9 times (33%) two sessions later, significantly below the 56% random odds. Average loss of 1.1% was double the 0.5% average gain. Only one case led to a 1%+ gain, leaving 1% moves 1-10…
SPY Two Red Candles Ahead of Jobs, Closes Higher Day of Report
04/01/22… SPX ???
03/05/21… SPX +0.9% two sessions later
05/08/20… SPX -2.0% two sessions later
05/03/19… SPX -2.1% two sessions later
08/04/17… SPX -0.1% two sessions later
12/02/16… SPX +0.9% two sessions later
04/01/16… SPX -1.3% two sessions later
12/04/15… SPX -1.3% two sessions later
09/05/14… SPX -1.0% two sessions later
02/01/13… SPX -0.1% two sessions later
05/06/11… SPX +1.3% two sessions later
12/04/09… SPX -1.3% two sessions later
08/07/09… SPX -1.6% two sessions later
11/07/08… SPX -3.4% two sessions later
10/05/07… SPX +0.5% two sessions later
12/08/06… SPX +0.1% two sessions later
09/01/06… SPX -0.8% two sessions later
10/07/05… SPX -0.9% two sessions later
05/04/01… SPX -0.4% two sessions later
12/08/00… SPX +0.1% two sessions later
05/05/00… SPX -1.4% two sessions later
11/05/99… SPX -0.4% two sessions later
11/05/98… SPX -0.3% two sessions later
10/02/98… SPX -1.8% two sessions later
05/08/98… SPX +0.7% two sessions later
01/19/96… SPX +0.2% two sessions later
12/08/95… SPX +0.2% two sessions later
12/02/94… SPX -0.0% two sessions later
On the plus side, the Dow Industrials managed a higher close Friday despite a 4% selloff for Dow Transports. That’s a pattern that tends to precede a bounce in stocks over the following week. 25 out of the last 30 occurrences (83%) led to a higher S&P500 one week later, a solid edge over the 55% random odds. 1% moves were 15-2…
Dow Transports -2%, Dow Industrials >-1%
(first occurrence in a week)
04/01/22… S&P500 ???
08/04/21… S&P500 +1.0% one week later, max DD 0.0%
07/27/21… S&P500 +0.5% one week later, max DD 0.7%
07/08/21… S&P500 +0.9% one week later, max DD 0.0%
06/17/21… S&P500 +1.1% one week later, max DD 1.4%
12/14/20… S&P500 +1.3% one week later, max DD 0.3%
05/04/20… S&P500 +3.1% one week later, max DD 0.0%
02/26/20… S&P500 +0.4% one week later, max DD 8.4% !
07/17/19… S&P500 +1.2% one week later, max DD 0.4%
04/25/19… S&P500 -0.3% one week later, max DD 0.9%
07/27/17… S&P500 -0.1% one week later, max DD 0.4%
08/02/16… S&P500 +1.2% one week later, max DD 0.2%
03/08/16… S&P500 +1.9% one week later, max DD 0.5%
12/02/15… S&P500 -1.5% one week later, max DD 2.1% !
10/27/15… S&P500 +2.1% one week later, max DD 0.1%
10/13/15… S&P500 +1.4% one week later, max DD 0.7%
07/23/15… S&P500 +0.3% one week later, max DD 1.8% !
06/08/15… S&P500 +0.3% one week later, max DD 0.3%
12/01/14… S&P500 +0.3% one week later, max DD 0.0%
10/22/14… S&P500 +2.9% one week later, max DD 0.0%
05/01/13… S&P500 +3.2% one week later, max DD 0.0%
10/24/12… S&P500 +0.4% one week later, max DD 0.4%
09/20/12… S&P500 -0.9% one week later, max DD 2.0% !
07/20/12… S&P500 +1.7% one week later, max DD 2.5% !
03/22/12… S&P500 +0.8% one week later, max DD 0.4%
02/15/12… S&P500 +1.5% one week later, max DD 0.2%
12/19/11… S&P500 +5.0% one week later, max DD 0.0%
02/23/11… S&P500 +0.1% one week later, max DD 1.0%
07/02/10… S&P500 +5.5% one week later, max DD 0.4%
10/21/09… S&P500 -3.6% one week later, max DD 3.6% !
06/03/09… S&P500 +0.8% one week later, max DD 0.6%
Only six of thirty cases saw the S&P500 decline 1.5% or more, suggesting the S&P500 will not trade below 4475 this coming week.
A noteworthy point from last Thursday’s Cumulative TICK buy signal is that the max drawdown over the next week was only 1.5%. That suggests the S&P500 will not trade below 4460 this coming week.
And in terms of the price pattern involving the 5% thrust followed by minimal drawdown, the market remains on a very bullish path as long as the S&P500 does not close below 4485.
So three key support levels for the coming week are all in the SPX 4460-4485 neighborhood. The short-term candlestick pattern suggests the potential for selling in the first 1-2 sessions, but if that pressure manifests it’s likely a buying opportunity given the likelihood that the market ends the week higher.
Looking beyond the short-term, I see Cumulative NYSE TICK just triggered an intermediate-term buy signal at Friday’s close. Over 27 occurrences since the elimination of the uptick rule in 2007, the S&P was up 24 times, down 3 times one quarter after the signal was triggered. Two of the three losses were under 2%, while the average gain was 5%…
Cumulative TICK Intermediate-term Buy Signal
04/01/22… S&P500 ???
06/02/21… S&P500 +7.5% three months later, max DD 1.0%
04/14/21… S&P500 +6.1% three months later, max DD 1.5%
06/03/20… S&P500 +12.9% three months later, max DD 3.9%
12/20/19… S&P500 -24.0% three months later, max DD 30.5%
01/17/19… S&P500 +10.2% three months later, max DD 0.1%
07/26/17… S&P500 +3.4% three months later, max DD 2.1%
07/20/17… S&P500 +3.2% three months later, max DD 1.9%
04/03/17… S&P500 +3.5% three months later, max DD 1.3%
06/08/16… S&P500 +2.4% three months later, max DD 5.6%
03/03/16… S&P500 +5.3% three months later, max DD 0.7%
11/11/14… S&P500 +0.4% three months later, max DD 3.3%
08/25/14… S&P500 +2.7% three months later, max DD 6.8%
06/30/14… S&P500 +1.9% three months later, max DD 2.6%
02/26/14… S&P500 +2.6% three months later, max DD 1.6%
01/21/14… S&P500 +1.0% three months later, max DD 5.5%
10/28/13… S&P500 +1.6% three months later, max DD 0.9%
05/07/13… S&P500 +5.0% three months later, max DD 3.3%
03/15/13… S&P500 +4.2% three months later, max DD 1.2%
01/16/13… S&P500 +5.4% three months later, max DD 0.0%
09/20/12… S&P500 -0.9% three months later, max DD 7.3%
02/01/12… S&P500 +6.0% three months later, max DD 0.0%
01/10/12… S&P500 +8.2% three months later, max DD 0.2%
02/25/10… S&P500 -1.4% three months later, max DD 3.2%
12/29/09… S&P500 +3.6% three months later, max DD 6.2%
10/21/09… S&P500 +6.4% three months later, max DD 4.2%
09/22/09… S&P500 +3.5% three months later, max DD 4.3%
07/27/09… S&P500 +11.1% three months later, max DD 0.7%
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