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Weekly Chart



It's been a quiet week so far. Unless the current range is extended, we will have seen the narrowest weekly range for the SP futures since August 1996. Nonetheless, I wanted to give you a few analogs to consider for next week.

If the SP closes higher today (and that's a big IF), the SP futures will have recorded the sixth consecutive higher close on the weekly chart. The last time we saw six higher closes was 2003 year end. At that time, the streak extended to nine consecutive higher closes before turning lower in late January.

However, the SP was in a defined uptrend at that time. The most interesting aspect of the current run is that it comes on the heels of a new yearly low in early August. So what happens when the SP makes at least a 20 week low (as was the case in early August) and then proceeds to post five consecutive higher closes on the weekly chart? Under these conditions, there were just three occurrences and the SP ended the next week lower each time (results below):

Again, the above stat is a little presumptive for today's close. But even if the SP closes lower today, we're likely to have an impressive streak of higher lows on the weekly chart. In fact, Hoofy will have scored five consecutive higher lows and higher highs. In total, this pattern occurred 46 times with the next week closing higher 65% of the time. But again, the scenario is unusal after such a dynamic low. And there's another kicker for next week: options expire today. If options have influenced this week's action, is it possible that today's expiration will cause at least a short-term shift in behavior? Glad you asked! History suggests at least the possibility.

How many times did the SP finish an expiration day with at least five consecutive higher highs and higher lows on the weekly chart? There were 13 occurrences (detailed below) and the SP posted either a lower close on the weekly or a lower low on the weekly chart in 10 of the 13 (and 2 of the 3 exceptions were holiday weeks).

In a nutshell, these studies lead me to conclude the following: next week has a high probability of making a lower low on the weekly chart and a slightly negative bias for the close. With all due respect to Hoofy, the current trend is clearly positive. But if we look at the patterns in the context of (a) the new yearly low in August and (b) option expiration, the forward results become negative to neutral (at best) for next week. That said, I did make a few assumptions in posting these studies before seeing today's action. But it's Friday, it's been quiet, and I wanted to give you a potential scenario for next week. Remember past performance does not indicate future results.

No positions in stocks mentioned.

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