This past week, the S&P 500 barely budged. I went back to January, 1996 (N = 516 trading weeks) and examined what happens after SPY is neither up nor down more than .20% during the week (N = 34 occasions). The following week, SPY was up by an average of .03% (15 up, 19 down), certainly no bullish edge relative to the sample overall (.17%; 280 up, 236 down). Three weeks out, however, was more positive. After a neutral week, SPY averaged a three-week price change of .89% (22 up, 12 down), compared with .51% (287 up, 229 down) for the sample.
As we saw in yesterday's posting, how the market traded during the period of analysis made a difference. When the neutral SPY week closed nearer its week's lows (N = 17), its next week's change averaged -.38% (5 up, 12 down) but three weeks out it averaged 1.18% (12 up, 5 down). When the neutral SPY week closed nearer its week's highs (N = 17), its next week's change averaged .43% (10 up, 7 down) and three weeks out it averaged .59% (10 up, 7 down).
Overall, after a neutral week in SPY, there is no directional edge going forward the next week, but some indication of strength three weeks out. This is especially true for neutral markets that close weak (such as this past one). They tend to see weakness spill over into the following week before reversing and closing stronger three weeks out.
I will be exploring more intraday and intraweek patterns relative to how we open and close. The above finding is interesting, but clearly not based on a huge sample. And, of course, it will be interesting to see how markets other than the S&P test out.