Daily Commentary - Posted on Thursday, September 24, 2009, 6:32 AM GMT +1

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Sep Thursday 24

Trading the Odds on Thursday – September 24, 2009

On Wednesday’s FOMC announcement session the ES E-MINI S&P 500 defied all probabilities and odds (which were heavily lopsided on the upside) and closed lower on the day (mainly due to a sell-off during the final hour of the session after the S&P 500 had surged to a 3-month high). It was the first lower close on an FOMC announcement session since 10/29/2008.

But the ES E-MINI S&P 500 went up (+0.47%) again between the end of the first and the start of the last hour of the session, the regularly most favorable time frame on an FOMC announcement day.

The ES E-MINI S&P 500 opened higher +0.12%, posted an intraday low of -1.12% (late in the session) below and an intraday high of +0.80% above Tuesday’s close, and finally closed lower -0.77% on the day, while the Nasdaq 100 closed lower -0.57% (S&P 500 -1.01%, DJ Ind. -0.83%, Russel 2000 -1.18%, SOX Philadelphia Semiconductor Index +0.52%, BKX Philadelphia Bank Index -2.12%).

Market breadth in S&P 500 stocks was heavily lopsided on the downside, with S&P 500 Advancing Issues/Declining Issues at 0.20 and Advancing Volume/Declining Volume at 0.25 (S&P 500 TRIN / Arms Index at 0.80). 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.

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Notably on Wednesday’s session were the facts that

  • Setup S1: the ES E-MINI S&P 500 closed lower on an FOMC announcement day,
  • Setup S2: S&P 500 market internals were heavily lopsided on the downside (Advancing Issues/Declining Issues and Advancing Volume/Declining Volume below 0.275) although the ES E-MINI S&P 500 didn’t post a close below -1.0% (price hold up better than breadth),
  • Setup S3: the SOX Philadelphia Semiconductor Index closed higher at least +0.50% despite a lower close for the Nasdaq 100 of at least -0.50%.

Table I shows the ES (E-MINI S&P 500) performance (since 01/01/1990) on the next session (in this event Thursday, September 24) immediately following those sessions where setups S1 to S4 listed above had been triggered in the past.

2009-09-23-ES-S1-5

All of those setups listed above are agreeing concerning their at least slightly positive outlook on the then following session, and especially setup S1 (the ES E-mini S&P 500 closed lower on an FOMC announcement day) provides a statistically relevant edge on the long side of the market (the associated t-score exceeds the +1.645 mark for statistical significance).

Table II now shows the ES E-MINI S&P 500 intraday performance (since 01/01/1990) concerning the open, the first hour of the session compared to the previous session’s close, 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 24) where S1 (the ES E-mini S&P 500 closed lower on an FOMC announcement day) had been triggered in the past.

2009-09-23-ES-S1i

Remarkable is the fact that the ES E-MINI S&P 500 immediately reversed course (and closed higher) on 20 out of the last 24 occurrences (after the ES E-mini S&P 500 had closed lower on an FOMC announcement day). In addition whenever S&P 500 market internals were heavily lopsided on the downside (setup S2) and the ES E-MINI S&P 500 hold up well (no lower close below -1.0%), the market reversed course on almost every 3 out of 4 occurrences the next day (33 higher and 13 lower closes).

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Bottom line:

At least based on historical probabilities and odds and the market’s regular performance on the session after it had posted a lower close on an FOMC announcement day, the outlook concerning the ES E-MINI S&P 500 performance on Thursday, September 24 is positive.

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.

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Comments (1)

 

  1. be the ball says:

    Just curious if you sold your long attempt (twitter post) at the close or are still holding it?

    curious day, that’s for sure

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