Friday was the 1st time SPY has closed at even a 5-day low since 3/26. The study below is one I have shown before. It examines other times when the SPY closed at a 5-day low for the 1st time in over 2 weeks. All stats are updated.

Results here suggest a moderate upside edge. The lesson with this study seems to be that persistent uptrends normally wither before they die, rather than turn on a dime.

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The employment report was released at 8:30am on Friday and the reaction in the futures was not good. ES sold down over 20 points in the next 45 minutes before closing for the day. As of Monday morning it has not bounced much. So it appears we are about to see a sizable gap lower..

Since inception of the SPY in 1993 there have only been 6 instances where the employment release came on Good Friday with the markets closed. And only 3 of those times did the market gap down to start the day on Monday. Here’s is what happened between the open and the close on Monday after those 3 instances.

There is nothing we can really learn with any degree of confidence based on just 3 instances. But it is a little encouraging for the bulls that the initial open lower was a bit of an over-reaction all three times.

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One thing to be aware is that while the market is closed on Friday for Good Friday, the BLS will be releasing the employment report. This is only the 11th time since 1980 that this has happened. Below is a list of all previous instances along with their performance on Monday when the market was open again.

Six instances closed down and four closed up on Monday, so on the surface this study does not seem substantial. But what is notable to me is that 7 of the 10 instances saw the market close either up or down by more than 0.75%. (Those are all circled in blue.) That shows the Monday reaction has often been volatile, and suggests risk may be elevated a bit because of this.

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The study below appeared in the Quantifinder on Friday. It is one I last showed on January 27, 2014 and it examines large drops on Fridays. Both the Crash of ’29 and the Crash of ’87 happened on Monday. The Crash of ’87 is still remembered by many traders that are active today. In 1987 there was a strong selloff on Friday and then all hell broke loose on Monday. But since then strong Friday selloffs have commonly been followed by bounces on Mondays. Perhaps this is due to the fact that fear of a crash causes what might otherwise be an ordinary selloff to become exaggerated and overdone on Fridays. Or perhaps it is just that people don’t want to hold over the weekend. Whatever the reason, the tendency to bounce has been very strong. All results are updated.

The numbers here are all very impressive and suggest a strong bullish bias over the next 1-6 days.

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I’ve been seeing mixed evidence over the last few days. In yesterday’s blog I showed a study that suggested short-term bullish inclinations. This morning’s study makes a case for the bears. It suggests that big intraday rallies like we saw on Friday that have been followed by tight consolidations like Monday have often seen the market roll over.

Instances are quite low, but the stats are strongly bearish. To take a closer look I have listed below all 10 instances.

The last 7 instances closed lower 5 days later, and all by at least 1.3%. Additionally, the Avg Drawdown is nearly 3x the Average Run-up. Even with the low number of instances, I feel this study is worth some consideration.

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