Daily Commentary - Posted on Thursday, September 17, 2009, 6:28 AM GMT +1

No Comments


Sep Thursday 17

Trading the Odds on Thursday – September 17, 2009

On Wednesday’s session the ES E-MINI S&P 500 posted a higher high (than the previous session’s high) on the 9th consecutive session (11 occurrences since 01/01/1990), under-performed the SPXEW S&P 500 Equal Weigthed Index on the 9th consecutive session (25 occurrences since 01/01/1990), and showed a positive performance during the final hour of the session on the 9th consecutive session (5 occurrences only since 01/01/1990) as well.

In addition Wednesday’s session marked the 12th consecutive occurrence where the ES E-MINI S&P 500 closed up on a third session in a row when it had already posted two higher closes at the start of option expiration week – as supposed the most reliable setup triggered on Tuesday’s close correctly calling for a third consecutive higher close on Tuesday’s session (see my posting Trading the Odds on Wednesday – September 16, 2009).

On Wednesday’s session the ES E-MINI S&P 500 opened slightly up +0.14%, posted an intraday low of -0.24% below and an intraday high of +1.31% above Tuesday’s close, and finally closed higher +1.29% on the day, while the Nasdaq 100 closed up +1.42% (S&P 500 +1.53%, DJ Ind. +1.12%, Russel 2000 +2.07%, SOX Philadelphia Semiconductor Index +0.42%, BKX Philadelphia Bank Index +4.03%).

Market breadth in S&P 500 stocks was strong, with the ratio of S&P 500 Advancing Issues/Declining Issues at 5.53 and Advancing Volume/Declining Volume at 6.01 (S&P 500 TRIN / Arms Index at 0.92). But interestingly – and for a second day in a row despite a higher close for the S&P 500 on the second consecutive session – volume on block trades with a down tick exceeded volume on block trades with an up tick (the raw number of block trades with an up tick marginally exceeded the number of block trades with a down tick on Tuesday’s session). So commercial traders/institutions seemed to be better sellers on Monday’s and Tuesday’s session.

____________

Notably on Wednesday’s session 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 9th consecutive session,
  • Setup S2: the ES E-MINI S&P 500 under-performed the SPXEW S&P 500 Equal Weigthed Index on the 9th consecutive session,
  • Setup S3: the ES E-MINI S&P 500 showed a positive performance during the last hour of the session on the 9th consecutive session,
  • Setup S4: the ES E-MINI S&P 500 closed up on the first three sessions during option expiration week, and
  • Setup S5: volume in S&P 500 block trades with a down tick exceeded volume on block trades with an up tick despite a higher close for the ES E-MINI S&P 500 on two consecutive sessions,
  • (no setup): the ES E-MINI S&P 500 traded higher at least +0.50% between the end of the first hour and the start of the last hour of the session on three consecutive sessions (only 26 occurrences since 01/01/1990),
  • (no setup): the SOX Semiconductor Index under-performed the Nasdaq 100 by at least -1.0% despite a strong up-day of at least +1.25% for the Nasdaq 100.

Table I shows the ES (E-MINI S&P 500) performance (since 01/01/1990) on the next session (in this event Thursday, September 17) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past.

2009-09-16-ES-S1-5

Almost all setups are agreeing concerning their negative outlook on the then following session, partly with (S2, S4 and S5) showing an associated t-score belowo the -1.645 mark for statistical significance which means there is a low probability only that the respective ES’ under-performance on a session after those 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 sample sizes are always very small, so some cautious will be warranted.

In addition when the ES E-MINI S&P 500 had traded higher at least +0.50% between the end of the first hour and the start of the last hour of the session on three consecutive sessions, it opened lower on 17 out of 26 occurrences (since 01/01/1990) on the then following session.

Table II shows the ES E-MINI S&P 500 intraday performance (since 01/01/1990) concerning the open, the low, 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 Thursday, September 17) where any of setups S1 to S5 listed above (including those setups which were listed for informational purposes only) 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.

2009-09-16-ES-S6i

The ES E-MINI S&P 500 shows a significantly above-average negative tendency -especially with respect to the intraday low and on the close- whenever the ES E-MINI S&P 500 had posted any of setups S1 to S5 listed above (including those setups which were listed for informational purposes only). Although probabilities for a higher close undercut the respective at-any-time probability for a higher close regularly marginally only, it is the significantly lower profit factor which makes the appreciable difference (means downside potential on down days regularly significantly exceeds upside potential on up-days).

________________________________

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 Thursday, September 17 is negative, and we might see a temporary setback and some profit tacking going into option expiration on Friday.

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).

Add to Technorati Favorites

Leave a Reply

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