Daily Commentary - Posted on Saturday, August 8, 2009, 10:09 PM GMT +1

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Aug Saturday 8

Trading the Odds on Monday – August 10, 2009

Friday’s session marked the 20th consecutive session where the ES (E-MINI S&P 500) didn’t loose -0.60% or more on the close, and the 11th consecutive session where the BKX Banking Index out-performed the ES (E-MINI S&P 500).

The ES (E-MINI S&P 500) gapped higher +0.98% on the open, posted an intraday low of +0.45% and an intraday high of +2.11% above Thursday’s close (and therefore left an unfilled opening gap up on the open), but couldn’t hold onto all of it’s gains and finally closed higher +1.16% on the day, while the Nasdaq 100 closed higher +1.20% (S&P 500 +1.34%, DJ Ind. +1.23%, Russel 2000 +2.65%, SOX Philadelphia Semiconductor Index -0.44%, BKX Philadelphia Bank Index+3.55%).

Market breadth on the NYSE and NASDAQ was strong, with NYSE Advancing Issues/Declining Issues at 3.83 and Advancing Volume/Declining Volume at 4.00 (NYSE TRIN / Arms Index at 0.83), and NASDAQ Advancing Issues/Declining Issues at 2.50 and NASDAQ Advancing Volume/Declining Volume at 2.23 (NASDAQ TRIN at 1.12). NYSE Advancing Volume accounted for 79.33% of NYSE volume.

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Notably on Friday’s close were the facts that

  • Setup S1: the ES (E-MINI S&P 500) left an unfilled opening gap on the upside (intraday low > previous session’s close),
  • Setup S2: the ES (E-MINI S&P 500) gave back almost 1.0% of it’s intraday gains (and almost half of’s it’s intraday gains) on a session where NYSE Advancing Issues/Declining Issues and Advancing Volume/Declining Volume both posted a strong reading above 3.5 on the close,
  • Setup S3: the NDX Nasdaq 100 out-performed the SOX Philadelphia Semiconductor Index the third day in a row,
  • Setup S4: the NDX Nasdaq 100 out-performed the SOX Philadelphia Semiconductor Index the third day in a row, on gaining momentum (means the percentage-wise magnitude of the NDX’s out-performance / the SOX’s under-performance increased three days in a row as well),
  • Setup S5: the SOX Philadelphia Semiconductor Index closed lower while the NDX Nasdaq 100 Index closed up, and the NDX Nasdaq 100 Index out-performed the SOX Philadelphia Semiconductor Index by a wide margin of at least 1.50%.

I therefore checked -as always from a historical and statistical perspective- for the market’s performance on the then following session(s) after those setups listed above had been triggered in the past. Table I shows the ES (E-MINI S&P 500) performance (since 01/01/2000) on the next session (in this event Monday, August 10) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past.

2009-08-07-ES-S1-S7

With respect to the time frame since 01/02/2000 almost all setups are agreeing concerning their negative bias on the then following session, and concering those setups which show the highest sample size (setups S1 and S3) with an associated t-score close to or exceeding the -1.645 mark for statistical significance (means there is a low probability only that the ES’ under-performance on a session after the respective setups had been triggered on close of the previous trading day in comparison to the at-any-time/average market’s performance and the negative performance at all occured by chance only).

But the most interesting setup triggered on Friday’s close will probably by setup S5. Table II shows the ES (E-MINI S&P 500) intraday performance (since 01/01/2000) concerning the open, high, low, close (compared to the previous’s session close) and close versus open on those sessions (in this event Monday, August 10) where setup S5 (‘the SOX Philadelphia Semiconductor Index closed lower while the NDX Nasdaq 100 Index closed up, and the NDX Nasdaq 100 out-performed the SOX Philadelphia Semiconductor Index by a wide margin of at least 1.50%‘) had been triggered on close of the previous trading day.

2009-08-07-ES-S5i

With respect to intraday stats (open/high/low/close/close vs. open/) on those sessions (in this event Monday, August 10) where setup S5 had been triggered on close of the previous trading day (since 01/01/2000), it is especially remarkable that the ES (E-MINI S&P 500)

  • shows a significant tendency for a lower open (on 19 out of 28 occurrences),
  • shows an above-average tendency for leaving an unfilled opening gap on the downside (on 8 out of 28 occurrences), and consequentially a significantly below-average profit factor on the intraday high (sum of all percentage-wise intraday highs divided by the sum of all percentage-wise intraday losses, for statistical purposes only in order to validate and demonstrate upside potential on the intraday high),
  • posted an average (!) intraday low of -1.79% below the previous session’s close on those 28 occurrences, which more than doubles the at-any-time average intraday low of -0.83%, and finally
  • posted an average trade of -0.42% on the close, and closed lower on 11 out of the last 12 and 13 out of the last 15 occurrences.

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Bottom line:

The outlook concerning the ES’ (E-MINI S&P 500) performance on the Monday, August 10 is negative due to the at least regularly limited upside potential on a session after the ES (E-MINI S&P 500) had left an unfilled opening gap on the upside on close of the previous trading day, but especially with respect to the fact that the ES (E-MINI S&P 500) shows a significantly above-average downside potential on the open, the intraday low and close as well on a session after the Nasdaq 100 had out-performed the Philadelphia Semiconductor Index by a wide margin of at least 1.50% (and the Nasdaq 100 closed up while the Philadelphia Semiconductor Index closed lower).

Successful trading,

Frank

P.s.: I’ll regularly make some intraday updates as well using Twitter. If you’re interested in, please have a look at the blog during the trading session as well or subscribe directly to Twitter (recommended).

Disclaimer: Short ES (E-MINI S&P 500) and long volatility at time of writing.

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Comments (1)

 

  1. Toptick says:

    You have made very good improvements to your reports over the last few weeks. And your tweets were good while you were away.

    Thanks!

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