Daily Commentary - Posted on Saturday, September 12, 2009, 11:14 PM GMT +1

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Sep Saturday 12

Trading the Odds on Monday – September 14, 2009

Friday’s session marked the 6th consecutive session where the ES E-MINI S&P 500

  • opened up (in comparison to the previous session’s close),
  • posted a higher open than the previous session’s open,
  • posted a higher low and a higher high (than the previous session’s low and high respectively),
  • went higher during the final hour of the session (a positive last hour), and
  • out-performed it’s counterpart the SPXEW S&P 500 Equal Weighted Index.

The ES E-MINI S&P 500 opened higher +0.29% (in comparison to Thursday’s close), posted an intraday low of -0.36% below and an intraday high of +0.62% above Thursday’s close, and finally closed almost unchanged -0.02% on the day, while the Nasdaq 100 closed almost unchanged -0.04% as well (S&P 500 -0.14%, DJ Ind. -0.23%, Russel 2000 -0.22%, SOX Philadelphia Semiconductor Index -1.41%, BKX Philadelphia Bank Index -1.15%).

Market breadth on the NYSE and NASDAQ was mixed, with NYSE Advancing Issues/Declining Issues at 1.34 and Advancing Volume/Declining Volume at 0.86 (NYSE TRIN / Arms Index at 1.55, closing in regularly negative territory), and NASDAQ Advancing Issues/Declining Issues at 1.05 and NASDAQ Advancing Volume/Declining Volume at 1.09 (NASDAQ TRIN at 0.97). NYSE Declining Volume accounted for 52.95% of NYSE volume.

Additionally notably on Friday’s session was the fact that on the third session in a row more than 70% of those stocks listed in the S&P 500 penetrated their previous session’s high while less than 30% penetrated their previous session’s low (broad-based participation in the current up-move).

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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 below had been triggered in the past.

  • Setup S1: the ES E-MINI S&P 500 opened up (in comparison to the previous session’s close) on six consecutive sessions,
  • Setup S2: the ES E-MINI S&P 500 posted a higher high (than the previous session’s high) on six consecutive sessions,
  • Setup S3: the ES E-MINI S&P 500 posted a higher low and a higher high (than the previous session’s low and high respectively) on six consecutive sessions,
  • Setup S4: more than 70% of those stocks listed in the S&P 500 penetrated their previous session’s high while less than 30% penetrated their previous session’s low on three consecutive sessions,
  • Setup S5: the next session will be on a Monday of option expiration week.

Table I shows the ES (E-MINI S&P 500) performance (since 01/01/1990) on the next session (in this event Monday, September 14) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past.

2009-09-11-ES-S1-5

Interestingly 6 consecutive sessions with a higher open or a higher high –assessed individually– show an at least slightly negative tendency on the then following session, while the combination of 6 consecutive sessions with a higher high and a higher low and/or three consecutive sessions with the majority of stocks listed in the S&P 500 penetrating their previous session’s high while the minority of stocks penetrated their previous session’s low favor a continuation, at least some temporary follow-through of the positive tendency on the then following session.

In addition all of those setups listed above are agreeing concerning their positive mid-term tendency with respect to an above-average probability for an at least one higher close than the trigger day’s (Friday’s) close over the course of the then following 5 sessions (in this event option expiration).

Table II shows the ES E-MINI S&P 500 intraday performance (since 01/01/1990) concerning the open, the first hour compared to the previous session’s close, the last hour compared to the first hour, the last hour of the session and the close (in chronological order) on those sessions (in this event Monday, September 14) where any of setups S1 to S5 (S1 or S2 or S3 or S4 or S5) listed above or any of those setups listed at the bottom of the post 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.

2009-09-11-ES-S6i

With respect to intraday stats (open/first hour vs. previous session’s close/last hour vs. first hour/last hour/close/, in chronological order) on those sessions (in this event Monday, September 14) where any of setups S1 to S5 (or those listed on the bottom of the post) had been triggered on close of the previous trading day, it is at least remarkable that the ES (E-MINI S&P 500) shows a slightly above-average negative tendency on the open and after the first hour of the session in comparion to the previous session’s (Friday’s) close, but a slightly (statistically not relevant due to the fact that the t-score is not exceeding the +/- 1.645 mark) positive tendency with respect to the rest of the session.

Additionally remarkable is the fact that since 01/01/1990 (34 occurrences) the ES E-MINI S&P 500 never lost more than -0.94% on close of a session immediately following six sessions with a higher high and a higher low (which may indicate limited downside potential on Monday’s session even in the event of a lower close), but out of those 35 occurrences since 01/01/2009 (year to date) where any of setups S1 to S5 (or those listed on the bottom of the post) had been triggered on close of the previous trading day, the ES E-MINI S&P 500 opened up more than +0.75% on only 2 while opening lower less than -0.75% on 11 occurrences, and the ES E-MINI S&P 500 was trading higher more than +1.0% after the first hour of the session in comparison to the previous session’s close on only 1 while trading lower less than -1.0% on 10 occurrences (historical probabilities and odds favor some weakness at the open and during the first hour of the session).

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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 Monday, September 14 is mixed with a slightly (but not statistically relevant) positive tendency during the second part of the session and on the close, but a negative tendency before and on the open at least until the end of the first 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 or subscribe directly to Twitter (recommended).

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

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Attachment (list of additional setups incorporated into the intraday stats):

  • the ES E-MINI S&P 500 did not loose more than -0.10% on a session with NYSE TRIN > 1.5,
  • the ES E-MINI S&P 500 posted a higher open than the previous session’s open on six consecutive sessions,
  • the ES E-MINI S&P 500went higher during the final hour of the session (a positive last hour),
  • the ES E-MINI S&P 500 out-performed it’s counterpart the SPXEW S&P 500 Equal Weighted Index,
  • more than 70% of those stocks listed in the S&P 500 penetrated their previous session’s high,
  • less than 30% of those stocks listed in the S&P 500 penetrated their previous session’s low.

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