Daily Commentary - Posted on Monday, September 28, 2009, 11:37 PM GMT +1

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Sep Monday 28

Trading the Odds on Tuesday – September 29, 2009

On Monday’s session the ES E-MINI S&P 500 fully complied to the positive outlook based on those setups which were triggered on Friday’s close (three consecutive lower closes, a lower low/high/close on two consecutive sessions, among others).

The ES E-MINI S&P 500 opened higher +0.29%, posted an intraday low of +0.26% above (and therefore left an unfilled opening gap on the upside) and an intraday high of +1.92% above Friday’s close, and finally closed significantly higher +1.75% on the day, while the Nasdaq 100 closed up +1.80% (S&P 500 +1.78%, DJ Ind. +1.28%, Russel 2000 +2.38%, SOX Philadelphia Semiconductor Index +2.06% , BKX Philadelphia Bank Index +2.84%).

Market breadth in S&P 500 stocks was heavily lopsided on the upside, with S&P 500 Advancing Issues/Declining Issues at 17.52 (95% of S&P 500 stocks closed higher) and Advancing Volume/Declining Volume at 8.20 (S&P 500 TRIN / Arms Index at 2.14).

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Notably on Monday’s session were the facts that

  • Setup S1: the ES E-MINI S&P 500 left an unfilled opening gap on the upside,
  • Setup S2: it was the last Monday of the month (we’re entering into the regularly favorable end-of-month time frame),
  • Setup S3: market internals (breadth) were heavily lopsided on the upside (at least 95% of S&P 500 stocks closed higher),
  • Setup S4: the ES E-MINI S&P 500 left an unfilled opening gap on the upside, and volume in S&P 500 stocks posted a 10-day low,
  • Setup S5: the ES E-MINI S&P 500 closed up at least +1.75%, and volume in S&P 500 stocks posted a 10-day low.

Table I shows the ES (E-MINI S&P 500) performance (since 01/01/1990) on the next session (in this event Tuesday, September 29) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past.

2009-09-28-ES-S1-5

Except setup S2 all of those setups listed above are agreeing concerning their slightly negative outlook on the then following session (with respect to the close), but none of them shows a statistically significant edge on any side of the market (the associated t-score does not exceed the +/-1.645 mark for statistical significance).

Table II below shows the ES E-MINI S&P 500 intraday performance (since 01/01/1990) concerning the low, 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 Tuesday, September 29) 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.

2009-09-28-ES-S6i

Except an at least noteworthy positive tendency during the first hour of the session (a bit of follow-through of the previous session’s strength), no significant edge during any phase of the then following session is provided. The ‘Average Trade (in %)’ is almost always close to zero, and the average winning as well as the average loosing trade with respect to the different intraday time frames almost always undercuts the respective at-any-time winning and loosing trade (for a probably tight intraday range, a trend day seems less likely). The marginally positive t-score with respect to the close is skewed by setup S2 (with approximately 50% of the total sample size / number of occurrences and a positive t-score).

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Bottom line:

With last Thursday’s intermediate long setup calling for an ES E-MINI S&P 500′ close above 1,044 on or before Thursday, October 1 now off the board, and based on historical probabilities and odds and the market’s regular performance on those session after any of setups S1 to S5 listed above had been triggered on close of the previous trading day, the overall outlook concerning the ES E-MINI S&P 500 performance on Tuesday, September 28 is mixed, probably slightly negative.

But due to the fact that historical probabilities and odds calling for a slightly negative tendency and the fact that we’re entering into the regularly favorable end-of-month time frame may flatten each other out short-term, I don’t expect any spectacular move on any side of the marklet (probably a tight intraday range, and a market taking a short-term breather) on Tuesday’s 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).

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Disclaimer: The information on this site is provided for statistical and informational purposes only. Nothing herein should be interpreted or regarded as personalized investment advice or to state or imply that past results are an indication of future performance. Under no circumstances does this information represent an advice or recommendation to buy, sell or hold any security. No position in the securities mentioned in this post at time of writing.

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