Daily Commentary - Posted on Friday, September 18, 2009, 7:21 AM GMT +1

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Sep Friday 18

Trading the Odds on Friday – September 18, 2009

On Thursday’s session the ES E-MINI S&P 500 posted a higher high (than the previous session’s high) on the 10th consecutive session (6 occurrences since 01/01/1990), but ended it’s streak (of up to then 9 consecutive sessions) of under-performing the SPXEW S&P 500 Equal Weigthed Index and of it’s positive performance during the final hour of the session as well.

On Thursday’s session the ES E-MINI S&P 500 opened almost unchanged -0.07%, posted an intraday low of -0.68% below and an intraday high of +0.75% above Wednesday’s close, and finally closed almost unchanged -0.07% on the day, while the Nasdaq 100 closed lower -0.15% (S&P 500 -0.31%, DJ Ind. -0.08%, Russel 2000 -0.31%, SOX Philadelphia Semiconductor Index -1.69%, BKX Philadelphia Bank Index -0.95%).

Market breadth in S&P 500 stocks was relatively weak, with S&P 500 Advancing Issues/Declining Issues at 0.47 and Advancing Volume/Declining Volume at 0.82 (S&P 500 TRIN / Arms Index at 0.57). Block trades with a down tick exceeded block trades with an up tick, and volume on block trades with a down tick exceeded volume on block trades with an up tick as well. So commercial traders/institutions seemed to be better sellers on Thursday’s session again (as is already seemed to be the case on Tuesday’s and Wednesday’s session).

At least during the majority of the session the market complied to what it was supposed to do: cit.: ‘a temporary setback and some profit tacking going into option expiration on Friday‘ (see my posting Trading the Odds on Thursday – September 17, 2009), but that kind of negative tendency (if any) was nothing to write home about.

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Thursday’s session didn’t leave much to lean on short-term. Notably were the facts that

  • Setup S1: the ES E-MINI S&P 500 posted a higher high (than the previous session’s high) on the 10th consecutive session,
  • Setup S2: S&P 500 Declining Issues more than doubled Advancing Issues despite the fact that the ES E-MINI S&P 500 did not really closed lower (barring the -0.07%),
  • Setup S3: S&P 500 TRIN closed below 0.60 (in regularly bullish territory) although the ES E-MINI S&P 500 couldn’t manage a higher close,
  • Setup S4: the SOX Semiconductor Index under-performed the Nasdaq 100 by a wide margin of at least -1.0% on two consecutive sessions although the Nasdaq 100 didn’t post a close lower than -0.50% on both sessions , and
  • Setup S5: the next session (Friday’s session) will be option expiration.

Table I shows the ES (E-MINI S&P 500) performance (since 01/01/1990) on the next session (in this event Friday, September 18) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past.

2009-09-17-ES-S1-5

None of those setups listed above provide a statistically relevant edge on any side of the market (associated t-score not exceeding the +/- 1.645 mark for statistical significance), although in the long run setup S5 (option expiration) shows a slightly negative tendency compared to at-any-time probabilities and odds.

In addition, none of those setups provided a statistically relevant intraday edge during any phase of the then following session (open/1st hour/last hour/close) on its own. But at least remarkable is the fact that whenever any of setups S1 to S5 listed above (S1 or S2 or S3 or S4 or S5) had been triggered on close of the previous trading day (indicating the overall tendency), the ES E-MINI S&P 500 showed an (statistically relevant) above-average negative performance during the first hour of the then following session (see stats below).

Table II shows the ES E-MINI S&P 500 intraday performance (since 01/01/1990) concerning the open, the first hour of the session, the last hour compared to the first hour (means the ES‘ performance between the end of the first hour and the start of the last hour of the session), the last hour of the session and the close (in chronological order) on those sessions (in this event Friday, September 18) where any of setups S1 to S5 listed above had been triggered on close of the previous trading day, indicating the ‘overall‘ (including best case / worst case) bullish or bearish tendency on the then following session.

2009-09-17-ES-S6i________________________________

Bottom line:

At least based on historical probabilities and odds and the market’s regular performance on those sessions after any of setups S1 to S5 had been triggered on close of the previous trading day, the outlook concerning the ES E-MINI S&P 500 performance on Friday, September 18 is mixed (no statistically relevant edge is provided on any side of the market). But it is notably that – with respect to historical occurrences – it doesn’t seem wise to go long at the open (better at the start of the last hour of the session).

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 (Twitter updates are shown on the upper right section of the blog) or subscribe directly to Twitter (recommended).

Disclaimer: No position in the securities mentioned in this post at time of writing (but long volatility).

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