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Frank Hogelucht

Frank Hogelucht

Individual investor, trading for a living since 2007, taking a statistical approach in combination with historical market data and addicted to developing market-neutral algorithmic trading…

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Santa and 52-Week Highs/Lows

The Santa Claus rally has come in a bit late this year, but not too late, and its delayed presents had been quite impressive so far.

The SPY (S&P 500 SPDR) closed out the Xmas week with a 3.95% gain, closing above the previous session's high on four consecutive sessions, and backed by volume associated with advancing stocks accounting for better than two-third of NYSE total volume four days in a row as well (a rare occurrence in itself).

On Friday, December 23, more than 5% of stocks listed on the New York Stock Exchange (NYSE) closed at a fresh 52-week high for the second day in a row, and less that 0.50% of NYSE-listed issues closed at a fresh 52-week low.

Historically, a high | low percentage of fresh 52-week highs | lows on the session immediately preceding Christmas Day had (significantly) short-term bullish implications. Table I below shows all occurrences (since 1960) and the S&P 500' performance over the remainder of the year (in this event until Friday, December 30) in the event more than 3.20% (in order to get a statistically significant sample size) of NYSE-listed issues closed at a fresh 52-week high the second day in a row, or less than 0.50% of NYSE-listed issues closed at a fresh 52-week low (not necessarily on a back-to-back session).

The S&P 500 closed at a higher level over the remainder of the year (day by day) on 15 out of 16 occurrences (years), and posted at least one higher close either the next or the next but one session (in this event until Wednesday, December 27). The S&P 500 did never look back and did not post a single close below the trigger day's close (the session preceding Christmas Day) in 14 out of 16 years, and (obviously) downside potential was almost non-existant.

And even without taking into account the positive end-of-year seasonality, a strong run-up in the markets backed up by percentagewise lopsided volume in advancing vs. declining stocks on the NYSE had positive implications in the past (although the sample size is a bit low).

Table II below shows all occurrences (since 1990) and the SPY's (S&P 500 SPDR) performance over the course of the then following five sessions (in this event until Tuesday, January 3, 2012) in the event the SPY closed above the previous session's high on four consecutive sessions, backed by volume associated with advancing stocks on the NYSE accounting for better than 60% of NYSE total volume four days in a row as well.

The SPY's (S&P 500 SPDR) posted at least one higher close above the trigger day's close over the course of the then following five session on all 10 occurrences, and downside potential had always been limited during the period under review (no short-term mean-reversion). The SPY did never lose 1.0%+ (on the close) over the course of the next three sessions, and maximum downside had been -1.46% five sessions later.

Conclusion(s)

Historical precedences suggest that the market will be heading higher over the remainder of the year.

Have a profitable week,

 


Disclosure: No position in the securities mentioned in this post at time of writing.

 

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