Daily Commentary - Posted on Tuesday, March 24, 2009, 5:30 AM GMT +1

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Mar Tuesday 24

Trading the Odds on Tuesday – March 24, 2009

My name is Frank, and due to the fact that this is my first post on the blog, a few introductory notes.

I have traded as an individual investor for more than 20 years now. I take a statistical approach in combination with historical market data to profit in the US equity and future markets, focused on intraday and swing trading opportunities (regularly using E-mini futures for intraday trading, and -leveraged- US equity index ETFs for swing trading) .

Please accept my apologies for not being a native speaker, and please take respect to the fact that that blog is (and will probably be for the time being) under construction (there is always room for improvement, especially right after the start, and especially focused to get the tables more self-explanatory; your suggestions -e.g. for different figures and/ore setups- are always more than welcome).

My email: tradingtheodds@fastmail.fm

BOTTOM LINE FOR TUESDAY – MARCH 24, 2009

  1. We may expect an above-average intraday volatility due to the fact that the S&P 500 closed up +5% on Monday (see table “w/Survey” below).
  2. If opening lower, the S&P 500 may probably trade up through Monday’s close and exceed Monday’s intraday high of 823.37 sometimes during the session, but might close flat to down (an S&P 500 +5% up session does regularly see some follow-through on such gains the next trading day).
  3. Even if the S&P 500 manages to open higher, the index may probably close flat to down.

The probabilities based on the weekday seasonality,the BASIC STRATEGY (S&P 500 2-day RSI) and the Survey (the session following a 5%+ gain in the S&P 500) favor a lower open on Tuesday (approximately 66%).

WEEKDAY SEASONALITY FOR TUESDAY

The table below shows the S&P 500′ historical probabilities and odds for a higher and lower open, a higher high and lower low (than the last sessions high/low) and a higher or lower close with respect to the days of the week (since 01/03/2007).

Since 01/03/2007 Tuesdays have been the strongest days of all weekdays, with on average and as a total (sum of all profits when buying the open) the biggest intraday gains (close versus open) of all weekdays in the event the S&P 500 opened higher, and the second smallest gains (going short on open) on the short side in the event the S&P 500 opened lower (close versus open), the latter pointing to a -on average- limited downside potential on Tuesdays in general.

weekdays-20090323

(click on image to enlarge)

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BASIC STRATEGY FOR TUESDAY – MARCH 24, 2009

The S&P 500 2-day Relative Strength Index RSI(2) closed at 84.84 on Monday, March 23, 2009.

Based on historical data since 01/03/2007, and with a 2-day RSI between 70 and 90 the previous session, the S&P 500 closed regularly flat to down the next session, with on average a close below the open independently if the S&P 500 opened up (on average a close –0.06% below the open) or down (on average a close -0.34% below the open). But in the event the S&P 500 opened up, the intraday high almost always exceeded the last sessions high, so we might expect to see the S&P 500 trading above 823.37 sometimes during Tuesday’s session.

Due to the fact that the S&P 500 index closed up more than 5% on Monday, I checked all (8) occurrences since 01/03/2007 when the S&P 500 closed up 5%+ (see table below, last column “w/Survey“) concerning the S&P 500′ behavior the next session.

# Date Higher High Close
1 03/11/2009 +1,71% +0,24%
2 12/17/2008 +0,46% -0,96%
3 11/25/2008 +0,39% +0,66%
4 11/24/2008 +8,04% +6,47%
5 11/14/2008 +0,42% -4,17%
6 10/29/2008 +3,13% -1,11%
7 10/14/2008 +3,71% -0,53%
8 10/01/2008 -0,09% -0,45%

Almost all of these sessions saw above-average intraday swings and in every case but one a (significantly) higher high (table row ‘Higher High’ = percentage change of today’s high versus the last sessions high), so at least intraday we might expect some follow-through on Monday’s gains.

 

rsi2-20090323

(click on image to enlarge)

 

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Successful trading
Frank

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