Monday, September 15, 2008

Tracking A False Breakout and an Abundance of Stocks Making New Lows

If you trace the Twitter comments for the day, you'll see how the day's weakness emerged. We got a breakout move above the preopening range in the December ES futures (top chart), with stocks making their peak around 10 AM CT. Note, however, that this peak was not confirmed by the financial sector (bottom chart), which was calling the theme for the day. As the financial stocks weakened and the Cumulative TICK turned decidedly downward, we reversed the morning price strength, fell back into the AM range, and then retraced the entire range and more. All in all, it was an excellent example of a failed breakout trade, with the market unable to sustain the move above the preopening range.

On a related note, I see we made over 3200 new 20-day lows on the session--a very weak figure. In fact, since September, 2002, we've only had 18 days in which 20-day lows have exceeded 3000. Thirty days later, the S&P 500 Index was up 15 of those 18 times, for an average gain of 3.26%. By contrast, the average thirty-day gain for the remainder of the occasions in the sample has been .88%. I'll be posting more indicator data via Twitter prior to Tuesday's open.