Daily Commentary - Posted on Thursday, August 6, 2009, 6:33 AM GMT +1

No Comments


Aug Thursday 6

Trading the Odds on Thursday – August 6, 2009

I’ll be out of office on Friday, so posting will resume over the weekend (for Monday’s session).

By the way: The most reliable pattern these days seems to be the market’t tendency to defy all odds and do the opposite of what it is supposed to do (just kidding). Depsite the fact that the Nikkei Stock Average 225, Hang Seng Index, ASX All Ordinaries Index and KOSPI Index were all up on Thursday morning, the ES (E-MINI S&P 500) closed lower on Thursday’s session although probabilities and odds were (significantly) tilt in favor of a positive bias.

____________

Update (02:30am CET): With Nikkei Stock Average 225, Hang Seng Index, ASX All Ordinaries Index and KOSPI Index all up on Thursday morning (at time of writing) depsite a lower close for the ES (E-MINI S&P 500) on Wednesday’s session, probabilities and odds are lopsided in favor of a positive outcome today, see http://twitpic.com/cyc4w. The ES (E-MINI S&P 500) opened higher on 85 and closed higher on 72 out of 105 occurrences since 01/02/1990 (profit factor on the open/high/low/close significantly above-average), with an associated t-score way above the +1.645 mark for statistical significance, so chances that the positive bias occured by chance only are very low.

____________

Tuesday’s session marked the eigtheenth consecutive session where the ES (E-MINI S&P 500) didn’t loose -0.50% or more on the close, the eleventh consecutive session where the BKX Banking Index didn’t post a lower close (10 up, 1 unchanged), the eigth consecutive session where the BKX Banking Index out-performed the ES (E-MINI S&P 500), and the fivth consecutive session where the BKX Banking Index closed up at least +1.0% or more.

But this time the ES (E-MINI S&P 500) not only complied to the forecasted slightly negative tendency, but the ES (E-MINI S&P 500) likewise left the unfilled opening gap on the downside which was already a frequent pattern in the past based on those setups which were triggered on Tuesday’s close (see my posting Trading the Odds on Wednesday – August 5, 2009).

The ES (E-MINI S&P 500) opened lower -0.15% today, posted an intraday low of -1.34% below Tuesday’s close, but -as almost always recently- reversed course and posted an intraday low of -0.07% below Tuesday’s close (and therefore left an unfilled opening gap on the downside) , but finally closed modestly lower -0.40% on the day, while the Nasdaq 100 -slightly under-performing today- closed lower -0.86% (S&P 500 -0.29%, DJ Ind. -0.42%, Russel 2000 -0.83%, SOX -1.09%, BKX +3.54%).

Market breadth on the NYSE was relatively strong despite a lower close for the S&P 500 and ES (E-MINI S&P 500) (due to the strong Banking Index), with NYSE Advancing Issues/Declining Issues at 0.85 and Advancing Volume/Declining Volume at 2.60 (NYSE TRIN / Arms Index at 0.33), and NASDAQ Advancing Issues/Declining Issues at 0.58 and NASDAQ Advancing Volume/Declining Volume at 0.43 (NASDAQ TRIN at 1.36). NYSE Advancing Volume accounted for 71.91% of NYSE volume.

____________

Notably on Wednesday’s close were the facts that

  • Setup S1: the ES (E-MINI S&P 500) left an unfilled opening gap on the downside (intraday high < previous session’s close),
  • Setup S2: the ES (E-MINI S&P 500) recently traded in a tight range, the intraday range did not exceed 1.5% (intraday high – low) on the eigth consecutive session now,
  • Setup S3: the ES (E-MINI S&P 500) closed lower on a session where NYSE Advancing Volume/Declining Volume posted a reading above 2,
  • Setup S4: NYSE Advancing Volume/Declining Volume posted a reading above 2 on the fivth consecutive session,
  • Setup S5: Up-Volume accounted for more than 66% of NYSE Volume on the fivth consecutive session,
  • Setup S6: the BKX Banking Index didn’t post a lower close on the eleventh consecutive session,
  • Setup S7: the ES (E-MINI S&P 500) under-performed the BKX Banking Index on the eigth consecutive session,
  • Setup S8: the ES (E-MINI S&P 500) under-performed the S&P 500 Equal Weigthed Index (SPXEW) on the fourth consecutive session,
  • Setup S9: the ES (E-MINI S&P 500) closed lower on a session where the BKX Banking Index closed up at least +3.0% or more.

and as always

  • Setup S10: any of Setups S1 to S9 listed above had been triggered (S1 OR S2 OR … OR S9), indicating the ‘overall‘ (including best case / worst case) bullish or bearish tendency on the then following session.

xx

I therefore checked -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 (click on the link below, the stats table doesn’t fit into the blog’s body) shows the ES (E-MINI S&P 500) performance (since 01/02/1990) on the next session (in this event Thursday, August 6) immediately following those sessions where setups S1 to S10 listed above had been triggered in the past.

http://www.tradingtheodds.com/stats/2009-08-05-ES-S1-S10.png

With respect to the time frame since 01/02/1990 almost all (except setup S3) are agreeing concerning their positive bias on the then following session, and regularly with an associated t-score close to or exceeding the +1.645 mark for statistical significance (means there is a low probability that the out-performance of the respective setups in comparison to the market and the positive performance at all occured by chance only). But to the contrary and despite the recent bullish period for the markets, since 01/01/2009 the ES (E-MINI S&P 500) shows a slightly negative tendency on the then following session where any of those setups S1 to S9 had been triggered.

Table II now shows the ES (E-MINI S&P 500) intraday performance (since 01/01/2009) concerning the open, high, low, close (compared to the previous’s session close) and close versus open on those sessions (in this event Thursday, August 6) immediately following those 35 sessions where setup S10 had been triggered (‘any of Setups S1 to S9 listed above had been triggered‘) in 2009, indicating the recent ‘overall‘ ( including best case / worst case) bullish or bearish tendency on the then following session after any of those setups listed above had been triggered on close of the previous trading day.

2009-08-05-ES-S10i

With respect to intraday stats (open/high/low/close/close vs. open/) concerning those sessions where setup S10 (‘any of Setups S1 to S9 listed above had been triggered‘) had been triggered on close of the previous trading day in 2009, and although there is no statistically significant edge (with an associated t-score above or below +/-1.645) provided on any side of the market (especially on the short side), it is at least notably that the ES (E-MINI S&P 500) shows a tendency (negative t-score) for a below-average performance due to the fact that the average trade undercuts the at-any-time average trade on the open, the intraday high, the intraday low, the close and the close versus open (and is negative on the close as well).

________________________________

Bottom line:

Due to the fact that long-term and recent probabilities and odds show deviant/contrary tendencies, and Asian markets show a positive performance on Thursday morning (at time of writing) despite a modestly lower close for the US markets on Wednesday’s session, the outlook concerning the ES’ (E-MINI S&P 500) performance on the next session (in this event Thursday, August 6) is mixed, but I wouldn’t be surprised if Thursday’s session goes to the bulls again.

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: No positions in the securities mentioned in this post at time of writing.

Add to Technorati Favorites

Leave a Reply

Your email address will not be published. Required fields are marked *