Daily Commentary - Posted on Tuesday, September 15, 2009, 8:49 AM GMT +1

No Comments


Sep Tuesday 15

Trading the Odds on Tuesday – September 15, 2009

Monday’s session (almost) perfectly complied to historical probabilities and odds. The ES E-MINI S&P 500 showed the expected weakness before and on the open and the supposed follow-through of last week’s strength (after posting a higher high and a higher low on 6 consecutive sessions) during the rest of the session with a positive close.

The exception was the fact that with a lower open and a positive first hour’s performance  > +0.5%, probabilities and odds were tilt in favor of trading (a bit) lower during the last hour of Monday’s session (negative performance on 195 out of 291 occurrences), but the supposed weakness never materialized.

On Monday’s session the ES E-MINI S&P 500 opened lower -0.70% (which already marked the low for the day), but reversed course immediately after the open, posted an intraday high of +0.79% above Friday’s close, and finally closed higher +0.62% on the day, while the Nasdaq 100 closed up +0.49% (S&P 500 +0.63%, DJ Ind. +0.22%, Russel 2000 +1.08%, SOX Philadelphia Semiconductor Index +0.45%, BKX Philadelphia Bank Index +0.81%).

Market breadth on the NYSE and NASDAQ was positive and inconspicuous, with NYSE Advancing Issues/Declining Issues at 2.07 and Advancing Volume/Declining Volume at 2.20 (NYSE TRIN / Arms Index at 0.94, closing in regularly negative territory), and NASDAQ Advancing Issues/Declining Issues at 1.58 and NASDAQ Advancing Volume/Declining Volume at 1.92 (NASDAQ TRIN at 0.82). NYSE Advancing Volume accounted for 68.05% of NYSE volume.

____________

Notably on Monday’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 seventh consecutive session,
  • Setup S2: the ES E-MINI S&P 500 showed a positive performance during the final hour on the seventh consecutive session,
  • Setup S3: the ES E-MINI S&P 500 posted a recovery day, opening lower at least -0.50%, but closing higher at least +0.50%, taking out the previous session’s low and high as well, and
  • Setup S4: the ES E-MINI S&P 500 open ed lower and closed up, but below the previous session’s high.

Table I shows the ES (E-MINI S&P 500) performance (since 01/01/1990) on the next session (in this event Tuesday, September 15) immediately following those sessions where setups S1 to S4 listed above had been triggered in the past.

2009-09-14-ES-S1-4

From a long-term perspective, historical probabilities and odds do not show a significant edge on any side of the market with respect to the ES E-MINI S&P 500′ close on the then following session (the respective t-scores do not exceed the +/- 1.645 mark for statistical significance).

But most recent occurrences might tell a different story. Table II shows the ES E-MINI S&P 500 intraday performance (since 01/01/2000) 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 Tuesday, September 15) where any of setups S1 to S2 (the ES E-MINI S&P 500 posted a higher high or showed a positive last hour on seven consecutive sessions) 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.

2009-09-14-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 Tuesday, September 15) where the ES E-MINI S&P 500 posted a higher high or posted a positive last hour on seven consecutive sessions in the past, it is remarkable that the ES E-MINI S&P 500 shows a significantly above-average negative tendency during the final part of the then following session (going into the final hour of the session in comparison to the previous session’s close, but especially during the final hour and on the close as well).

Since 01/01/2000 (25 occurrences) the ES E-MINI S&P 500 posted a gain of more than +0.20% during the final hour of the then following session only once (max. gain +0.55%), and closed lower on the last 7 occurrences (the last three in 2009 with a significantly loss of more than -1.45% despite the recent run-up in the markets), indicating that buying power is regularly exhausted for the short-term, and profit taking into the close was the prevailing theme in the past.

________________________________

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 S4 had been triggered on close of the previous trading day, the outlook concerning the ES E-MINI S&P 500 performance on Tuesday, September 15 is mixed with respect to the first part of the session (no significant edge is provided on the open and/or until the start of the last hour of the session).

But the outlook turns significantly negative going into the last hour of the session, and a short-term opportunity on the short side of the market might be provided especially in the event the ES E-MINI S&P 500 would be trading above Monday’s close going into the last hour of Tuesday’s session targeting a negative performance during the last hour of the session and a (probable) lower close as well.

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.

Add to Technorati Favorites

Leave a Reply

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