Streaks and setbacks

  • Stocks stalled Monday-Tuesday after Friday YTD high
  • Down weeks after 5 up weeks more common than not
  • Gold retreats from record, PPC call option activity surges

Given the stock market is in a historically seasonally bullish period of the year, the lukewarm trading so far this week may have disappointed investors and traders who had become accustomed to a one-way market over the past five weeks. After all, prior to Tuesday, the S&P 500 (SPX) hadn’t posted back-to-back down days since October 27, and the market ended last week on a strong note.

Those who looked at the SPX’s track record after other five-week up streaks probably had a slightly different attitude. It’s something the SPX has done 99 other times since 1957, most recently in June:

Chart 1: S&P 500 (SPX), 4/25/23–12/5/23. S&P 500 (SPX) price chart. Five-week winning streaks.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation. Note: It is not possible to invest directly in an index.)

The SPX’s performance after June 16 was, more or less, in line with its “typical” performance after other five-week streaks: More often than not (54 out of 99 times), the index closed lower the next week.1

Also, while the SPX’s average one-week return since 1957 is a little more than 0.15%, it’s average weekly return after five-week up streaks is -0.14%:

Chart 2: S&P 500 (SPX) one-week returns, Jan. 1957–Dec. 2023. Negative avg. return after five up weeks

Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation. Note: It is not possible to invest directly in an index.)

What remains to be seen is whether the SPX will follow this pattern by posting a net loss for this week, and also whether it will bounce back the same way it did in late June and early July.

Market Mover Update: Pilgrim’s Pride (PPC) shares had a relatively quiet Tuesday, but the ticker was all over the LiveAction scans for unusual options activity. Call volume was more than 170 times average around midday (28,596 vs. 164), with the following notable trades:

1. 8,100 of the January $28 calls vs. open interest (OI) of 8,200
2. 8,400 of the January $29 calls vs. OI of 8,400
3. 5,100 of the March $29 calls vs. OI of 12,600
4. 6,900 of the March $30 calls vs. OI of 301

Today’s OI totals should shed some light on which options traders were getting into and which ones they were closing out.

Pure Storage (PSTG) closed lower for a third-straight day since rebounding intraday after an 18% sell-off on November 30 (see “Timing is everything (sometimes)”). After tagging a record intraday high—but closing lower—on Monday, gold followed through to the downside on Tuesday. February gold futures (GCG4) traded as low as $2,027.60, more than $120 below Monday’s high.

With a cooling labor market key to expectations for a less-hawkish Fed in 2024, the numbers in Friday’s monthly jobs report will be scrutinized to the last decimal place. In the meantime, Tuesday’s Job Openings and Labor Turnover Survey (JOLTS) showed job openings dropped—sharply—to 8.73 million in October, the lowest total since March 2021.

Today’s numbers include (all times ET): Mortgage applications (7 a.m.), ADP Employment Report (8:15 a.m.), International Trade in Goods and Services (8:30 a.m.), Productivity and Labor Costs (8:30 a.m.), EIA Petroleum Status Report (10:30 a.m.).

Today’s earnings include: Campbell Soup (CPB), Ollies Bargain Outlet (OLLI), United Natural Foods (UNFI), C3 AI (AI), Chewy (CHWY), Thor Industries (THO), Verint Systems (VRNT).


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1 All figures reflect S&P 500 (SPX) weekly closing prices, 1957-2023. A five-week up streak refers to five consecutive higher weekly closing prices that followed a lower weekly closing price. Supporting document available upon request.

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