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The Market's Outlier Days and Resistance

Outlier Days

We began last week’s update with this sentence:

The S&P 500 has now gone 21 consecutive trading days without an “outlier day” (trading day beyond +/-1.50%). This marks the longest streak of consecutive days without an outlier since November 2021.” – Canterbury Market Update April 24, 2023

The streak without an outlier day ended at 22 trading days. Last Tuesday, the S&P 500 experienced a -1.58%. Two days later, on Thursday, came another outlier day, with the market rising +1.96%. In our update from last week, we noted that this was a possibility:

“An outlier or two would not be unusual at this point, but nonetheless, the declining frequency of outlier days is positive for the market.” – Canterbury Market Update April 24, 2023

So, what does this mean? How was an outlier day not unusual? Well, for starters, short-term volatility (as measured by the 10-day Canterbury Volatility Index or CVI), reached its lowest point since November 2021. Longer term volatility had declined to its lowest level since the beginning of 2022. This can be like the squeezing down of a spring. Eventually, the market will let off some pent-up pressure in the form of an outlier day or two.

While the market index experienced a downward outlier day, it countered with an outlier day to the upside. Those who pay little to no attention to the market’s fluctuations would not have noticed the two large daily moves. In other words, even with two outlier days, the market’s final result for the week appeared normal.

We also pointed out last week that not only has the frequency of outlier days declined in 2023, but so has the “extent of those outliers.” Last year, the market experienced 75 outlier days of at least +/-1.50%. Neither of the two outlier days seen last week would have been in the top 50 largest outlier days from last year. While all outlier days are emotional, so far, the outliers seen in 2023 have been much less erratic.


The S&P 500 is still hovering around a point of resistance. That means it is currently in a spot that it cannot seem to break above. The same is true for some of the market’s largest sectors. Charts of the S&P 500 as well as the Information Technology, Communications, and Consumer Discretionary sectors can be found below.

Source: Canterbury Investment Management. Charts created using Optuma Technical Analysis Software. Charts show ETFs SPY, XLK, XLC, and XLY

  1. Chart #1 depicts the S&P 500, which is currently sitting at a point of resistance, after experiencing the two outlier days mentioned earlier.

  2. Chart #2 shows the Information Technology sector. This is the largest individual market sector and contains stocks such as Apple and Microsoft. It is also currently at a point of resistance.

  3. Chart #3 shows the Communications sector, which contains stocks such as Google and Meta (Facebook). It led the market’s “upward” outlier last week. The outlier day to the upside concluded at a point of resistance that intersects a few of the sector’s prior peaks.

  4. Chart #4 shows the Consumer Discretionary sector. This sector’s largest components include Amazon, Tesla, and Home Depot. You can see the sector’s resistance line has been drawn diagonally across prior peaks. In addition, it has an increasing lower support line. The sector’s price is at an intersection between resistance, support, it’s 200-day moving average, and 50-day moving average.

Each of these charts is now sitting at a point of resistance that it is attempting to break above. Collectively, the three technology-heavy sectors shown above account for 44% of the S&P 500’s market capitalization. In other words, whichever way these three sectors go, whether they bounce down off upper resistance or a breakout above resistance, they will have a large impact on the market’s movement.

Other Notes

As for the rest of the global markets, European stocks continue to perform well relative to the US markets. Part of this relative strength comes from a weak dollar. Long-term treasury bonds have trended sideways for the last few months and now have higher volatility (as measured by CVI) than the S&P 500.

From both a fundamental and technical perspective, the market’s weakest areas continue to be Financials, Real Estate (mostly commercial), and small cap stocks (which have more exposure to regional banks). This has led to a weaker Advance Decline Line (number of stocks up versus down), meaning that market breadth is narrower. The larger sectors like Technology and Communications have led the market higher, while many individual components have not been quite as strong. Right now, this is a short-term trend and not a concern just yet.

Bottom Line

Even with the two outlier days seen last week, the market’s volatility is still in a downtrend. Declining volatility, along with a lower frequency of outlier days and a lesser impact of those outlier days, is a good sign for the market. It shows the market is becoming increasingly efficient and rational. Right now, a few of the market’s larger sectors are attempting to push through upper resistance, and if successful, could bode well for the market.

As a final thought to this update, it is important to avoid trying to predict the markets. No one knows where the market will be next week, next month, or next year. Fortunately, you can adapt to the market’s current climate, just as your home thermostat adapts to the temperatures outside. At Canterbury, we employ an adaptive portfolio management solution called the Canterbury Portfolio Thermostat. It is designed to adapt its holdings and adjust its allocations to move in concert with ever-changing market environments- bull or bear.


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