Daily Commentary - Posted on Wednesday, September 9, 2009, 8:29 AM GMT +1

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Sep Wednesday 9

Trading the Odds on Wednesday – September 9, 2009

The series of (bullish) abnormalities continues. Tuesday’s session marked the first session out of 28 occurrences since 01/01/1990 where the ES E-MINI S&P 500 opened up more than +0.42% immediately following a long weekend (with an exchange holiday on a Friday or on a Monday) where it had already closed up on two consecutive sessions immediately preceding the long weekend (not taking into account the GLOBEX session on the exchnage holiday). In addition tt was the third session since 01/01/1990 only where the S&P 500 closed up more than +0.75% despite a NYSE TRIN closing above 1.5 in regularly significant negative territory.

On Tuesday’s session the ES E-MINI S&P 500 opened higher +1.13% (in comparison to Friday’s close), posted an intraday low of +0.49% above and an intraday high of +1.16% above Friday’s close, and finally closed higher +1.08% on the day, while the Nasdaq 100 closed up +1.02% (S&P 500 +0.88%, DJ Ind. +0.59%, Russel 2000 +1.03%, SOX Philadelphia Semiconductor Index +2.25%, BKX Philadelphia Bank Index -0.33%). The S&P 500 and the ES E-MINI S&P 500 both left an unfilled gap on the upside (Tuesday’s intraday low greater than Friday’s intraday high).

Market breadth on the NYSE and NASDAQ was mixed, with NYSE Advancing Issues/Declining Issues at 3.05 and Advancing Volume/Declining Volume at 1.93 (NYSE TRIN / Arms Index at 1.58, closing in regularly negative territory despite a higher close for the index), and NASDAQ Advancing Issues/Declining Issues at 1.59 and NASDAQ Advancing Volume/Declining Volume at 3.11 (NASDAQ TRIN at 0.59). NYSE Advancing Volume accounted for 85.86% of NYSE volume.

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Notably on Tuesday’s session were the facts that

  • Setup S1: the ES E-MINI S&P 500 left an unfilled gap on the upside,
  • Setup S2: the ES E-MINI S&P 500 posted the 3rd consecutive session with a higher open, a higher low, a higher high (than the previous session’s low/high), and a higher close (not taking into account the ES E-MINI S&P 500′ session on GLOBEX on Monday which was positive as well),
  • Setup S3: the S&P 500 closed higher on a session with NYSE TRIN > 1.5 (a negative divergence),
  • Setup S4: the ES E-MINI S&P 500 closed higher at least +0.75% on a session where it posted it’s narrowest range of the last 10 sessions (+0.67% only between Tuesday’s intreaday low and high),
  • Setup S5: the ES E-MINI S&P 500 outperformed the BKX Philadelphia Bank Index by a wide margin of at least 1.0% (and the S&P 500 closed higher while the BKX Philadelphia Bank Index closed lower).

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 above had been triggered in the past. Table I shows the ES (E-MINI S&P 500) performance (since 01/01/1990) on the next session (in this event Wednesday, September 9) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past.

2009-09-08-ES-S1-5

All setups are again agreeing concerning their negative bias on the then following session, showing a (partly significantly) below-average probability for a higher close, a profit factor which (at least slightly) undercuts the at-any-time profit factor (sum of all winning trades divided by the sum of all losing trades), and an associated negative t-score close to or below (setup S1 and S2) the -1.645 mark for statistical significance (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).

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 Wednesday, September 9) where any of setups S1 to S5 (S1 or S2 or S3 or S4 or S5) 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.

2009-09-08-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 Wednesday, September 9) where any of setups S1 to S5 had been triggered on close of the previous trading day, it is especially remarkable that the ES (E-MINI S&P 500) shows a significantly above-average negative tendency (all -except the final hour of the session- with an associated t-score close to or exceeding the -1.645 mark for statistical significance) right from the start of the session onward.

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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 Wednesday, September 9 is short-term negative (especially with respect to a lower open and a lower close), except a temporary positive tendency during the first hour of the session in the event of a lower open.

If the ES E-MINI S&P 500 closes up on Wednesday’s session again, it would then be the 2nd out of 11 occurrences where the ES E-MINI S&P 500 would close up after three consecutive sessions with a higher open, a higher low, a higher high and a higher close (only happened once out of 10 occurrences so far since 01/01/1990, see setup S2).

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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