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Counter-Trend Tuesday?



Yesterday I highlighted a positive bias for Monday's close given that the SPH had closed below the prior day's LOW for three consecutive days. But hey, stats are just stats and the market had other plans. One thing has become clear over the last four days: higher opens aren't working. For the last four days, the S&P futures have opened with a cumulative gain of 14.60 points - but by the close, the index recorded a loss of -11.50 points. That's an intraday decline of 26.1 points.

It's safe to argue that the intraday trade hasn't been easy. The NDH is in its sixth week of declines and is more than 5% from the high. Meanwhile, the SPH is just 1.5% from its high and the bears haven't thrown up a more than 10 point decline since January. As Todd mentioned yesterday, it's the banks. Keep an eye on them.

As for Tuesday, the numbers again suggest a higher close. Let's call it a possible "counter-trend Tuesday." Remember that past performance is no guarantee of future results but it's worth looking at the data:

(1) When the next day is Tuesday and the S&P futures closed lower for four straight days, the next day's close was higher 69% of the time.
(2) The S&P futures closed below the prior day's low three straight days. Where the next day's close was lower, the following day closed higher 72% of the time.
(3) Remember that yesterday we used the above criteria but specified that at least a 100 day high close preceded the pattern. The S&P had only closed lower the next day 3 times. Let's make that "4" now that we've seen yesterday's action. But be aware that each of those 3 occurrences saw a higher close the next day.

Good Luck!

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