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History 101



For the last month, technicians have been observing the index action around the 50-day moving average. In April, we've spent just as much time above the key average as we have below. However, yesterday's action marked a decided close below the much watched level. Today's query tries to capture the dynamics of yesterday's decline and analyze the historical reaction.

Query: First, I qualified that the SP futures opened above the 50-day average and closed below it. I then stipulated that SP futures closed down at least 1% on the day AND that the close was at least .5% below the 50-day average (to show a signficant move below). Finally, I qualified that the index gapped lower and never traded positive (as was the case yesterday).

Result: There were 15 occurrences listed below. The table shows the return for next day, five day, and ten days out. Overall, there is not a compelling bias. However, there are two facts worth mentioning:

  • The next day's trade was generally a range trade. Only 3 of 15 closed more than 1% from unchanged and 5 of 15 only closed more than .5% from settlement.
  • One of the examples preceded the 1987 crash. I know some folks scoff when we make analogies to 1987 but any time I run a query that shows a comparison to the BIG ONE, I think it's worth sharing.

Below is the table of past results and then I've provided today's chart over the '87 chart with the day's marked that met the above criteria. As always Minyans, past performance does not indicate future results.

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No positions in stocks mentioned.

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