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Back to Back Outside Days for SPY

Thursday marked the 2nd day in a row that SPY posted an outside day. (An outside day is a day where the security or index makes a higher high and a lower low than the day before.) It’s quite unusual to see 2 consecutive outside days. I last examined back-to-back outside days for SPY in the 5/23/13 subscriber letter. I have updated that study below.

The numbers look very impressive.

It is also worth noting that this pattern has also done well with QQQ in the past.

A Turnaround Tuesday Setup

I've discussed many times in the past that Tuesdays have a well-earned reputation for being a day when the market will often halt a decline.  The study below is one from the larger Turnaround Tuesday study published in the 9/25/12 blog. All statistics are updated.

As you can see the market has strongly favored a quick move higher.  And when that move hasn't happened on Tuesday it has often happened in the next few days.

Some Evidence It Is About Time For SPY To Pull Back

SPY has now gone 11 days without closing below its 5ma, and it closed Tuesday at another new high. The study below is one I’ve shown a few times over the years, most recently in October.  It looks at other instances in which SPY has traded above the 5ma for at least 2 weeks and is now closing at a 10-day high. All results are updated.

In the past this setup has commonly been followed by a short-term pullback. The downside edge doesn't last long, though. It seems to pretty much play itself out over the first 2 days.  It is not an overwhelming edge, but it is still worth noting that SPY has been short-term extended for a while and the normal course of action at this point is a little pullback.