2 Up Days After A 20-day Low The SPY Gaps Up 1%...

A quick study for you the morning...

Not much to go by, but perhaps some caution is warranted intraday. I also looked out over the next few days. They appear to be a tossup.

2% Gaps Up From 20-day Lows

With SPY looking to gap up over 2.5% this morning below is a quick look at all other instances since 2003 when SPY gapped up over 2% immediately following a 20-day low.

Low number of instances, but the suggestion is obvious.  I would note, though that although they all finished higher, they also saw some substantial pullbacks from the opening price.

When The Wednesday Prior To Thanksgiving Has Closed Lower

It appears the market is going to buck historical tendencies today and close down.  This will be the 11th time since 1960 that the SPX has closed lower on the Wednesday before Thanksgiving.  Below I have listed the other 10 instances along with the SPX performance on Friday (the day after Thanksgiving).

The 2 instances that I have circled are the only 2 where the SPX closed the Wednesday before Thanksgiving down over 1%.

For what it's worth I would note that statistics associated with these 10 instances (win %, profit factor, avg. gain, etc) are pretty much in line with all Fridays after Thanksgiving.  (It has generally been bullish.)

The Wednesday Before Thanksgiving

Thanksgiving has typically shown some pretty consistent seasonality.  Both the Wednesday before and the Friday after have exhibited bullish tendencies while the Monday after has been slightly bearish.  Last year I showed a table breaking it all down by day.  Today I decided to show a profit curve that represents simply owning the SPX from Tuesday's close through Wednesday's close.

Futures are down quite a bit this morning, so it may be difficult to keep this curve moving higher today, but over the years the next couple of days has been a pretty good bullish bet.  And when seasonality is this consistent it is often worth keeping in mind.

A 1% Gap Down from a 20-day Low

The SPY finished at a 20-day low on Friday, and now it is gapping down large this morning. I ran a test to see what kind of intraday edge this might suggest.

The raw numbers appears to suggest a mild intraday upside edge. But take a look at the profit curve.

This curve does not get me excited about buying into this gap down. Instead I will need to see more compelling evidence in order to anticipate an intraday move higher.

Vegas Traders Expo

I am at the excellent Las Vegas Traders Expo for the next few days.  I plan on seeing several presentations and will be speaking myself on Saturday.  I'd love to meet some blog readers, so please come introduce yourself if you see me. 

More information here:

http://www.moneyshow.com/tradeshow/las_vegas/traders_expo/main.asp


And here's the info on my presentation:

http://www.moneyshow.com/tradeshow/las_vegas/traders_expo/workshop_details.asp?wid=662DEA40711D4A5996872FB4F518F39D

Low Volume A Possible Concern

Monday’s extremely low volume could be a short-term bearish sign. The 0.96% drop did not quite qualify for this 2008 study, but below is another past study that does exemplify the low-volume issue. Rather than index volume, it uses SPY volume. Either one would yield similar results in this case.

While not the most overwhelming edge we’ve ever seen, it does seem to strongly suggest that caution is warranted.