Daily Commentary - Posted on Thursday, October 15, 2009, 11:39 PM GMT +1

No Comments


Oct Thursday 15

Trading the Odds on Friday – October 16, 2009

xx

Although longer-term probabilities and odds were tilt in favor of a negative bias on Friday’s session, the market (expectedly) followed recent occurrences which showed a positive tendency (on the close) immediately following those sessions where the respective setups had been triggered in the past (see my posting  Trading the Odds on Thursday – October 15, 2009 with a mixed forecast due to the short-term and long-term conflicting tendencies).

But (fortunately) the market fully complied to those historical occurrences which provided two tradeable edges,  the first one triggered on Wednesday’s close forecasting a lower open on Thursday’s session (or trading significantly lower before the open), and the second one  on Thursday before the open when the ES E-MINI S&P 500 was trading approximately -0.60% below Wednesday’s close (triggering an intraday buy setup) due to the fact that downside potential is regularly limited on those session immediately following a session with strong gains on the close (see my respective Twitter Updates).

Index / Future / ETF Symbol Date Close (%) Open 1) High 1) Low 1) 1st Hour 2) Last Hour 3)
E-MINI S&P 500 * ESZ9 10/15/2009 +0.18% -0.39% +0.51% -0.46% +0.12% -0.07%
S&P 500 SPX 10/15/2009 +0.42%
Dow Jones Industrial INDU 10/15/2009 +0.47%
Nasdaq 100 NDX 10/15/2009 0.05%
E-MINI Nasdaq 100 * NQZ9 10/15/2009 +0.04% -0.27% +0.37% -0.41% +0.10% -0.03%
Russel 2000 RUT 10/15/2009 0.10%
Semiconductor Index SOX 10/15/2009 -1.41%
Philadelphia Bank Index BKX 10/15/2009 -0.69%
* close at 04:15 PM CET 1) vs. the previous session’s close 2) 09:30-10:30 AM 3) 03:00-04:15 PM

_________________________

Unfortunately Thursday’ session did not leave much to lean on short term. So I checked for those setups triggered on close of Wednesday’s session, followed by another positive close (like on Thursday’s session).

No. INDEX SETUPS TRIGGERED (on Wednesday’s close, followed by aanother higher close)
1 E-MINI S&P 500 opened higher at least +1.00% above the previous session’s high
2 E-MINI S&P 500 opened higher at least +1.25% (above the previous session’s close)
3 E-MINI S&P 500 left an unfilled gap on the upside greater than +0.50%
4 E-MINI S&P 500 left an unfilled opening gap on the upside greater than +0.75%
5 E-MINI S&P 500 closed at least +1.00% above the previous session’s high

* ) : –

( * the setup doesn’t provide a statistically significant edge on any side of the market)

Table I shows the ES E-MINI S&P 500 performance on the open (since 01/01/2000) on the next session (in this event Friday, October 16) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past, followed by another higher close on the then following session.

2009-10-15-ES1-S5

All of those setups listed above are agreeing concerning their negative outlook with respect to the open on the then following session, with – on average – maximum one higher open for every two lower open.

Setup S4 (‘the ES E-MINI S&P 500 left an unfilled opening gap on the upside greater than +0.75%‘), followed by another higher close on the then following session, was triggered on 6 occurrences since March 2009 when approximately the current bull market started, and despite a strong underlying positive trend the ES E-MINI S&P 500 opened lower on all 6 occurrences on the then following session (in this event Friday, October 16).

________________________________

Bottom line:

At least based on historical probabilities and odds and the market’s regular performance on the session after any of those setups listed above had been triggered on close of the previous trading day, the outlook concerning the ES E-MINI S&P 500 performance on close of Friday, October 15 is mixed again, probably with a slightly negative bias (but I don’t expext much selling pressure on a Friday).

But a tradable edge is (again) provided on the statistical observation that – short-term and longer-term – the market regularly shows some weakness before / on the open or during the first hour of the then following session.

Successful trading,
Frank

________________________________

Summary of potentially tradable edges for Friday – October 16, 2009

DATE TIME WHAT
ACTION WHY ENTRY
STOP 1)
Pos. Size 2) 3)
10/15/2009 04:00 PM E-MINI S&P 500 SHORT lower open next session 1092.50 (-18) $5,625

1)
  • due to the fact that the data is intended for statistical purposes only, regularly no stop is provided (if not stated otherwise) ; the trade may be closed early if the respective market environment suggests (published via Twitter)
  • the STOP may represent a buy or a sell stop ; on a long position a STOP above the ENTRY will represent a limit order (profit target achieved), a STOP below the ENTRY a stop order ; the inverse applies to a short position respectively
2) For position sizing, optimal f (by Ralph Vince) is utilized;

optimal f = ([( win/loss ratio + 1 ) * probability of a winning trade ] – 1 ) / ( win/loss ratio ) ;
win/loss ratio = avg. gain on a winning trade / avg. loss on a losing trade ;          /% simplified version
Pos. Size (in $) = MAX [Intraday / Overnight Initial Margin ; Maximum Losing Trade (in $) / optimal f ]
(Intraday Initial Margin = $2,250 ; Overnight Initial Margin = $5,625)

3) Position size in units per $xxx of marginable equity; if the E-MINI S&P 500 is utilized, the number in brackets equates to the number of contracts, otherwise to the number of leveraged Exchange-Traded Funds (ETFs) of 300% of the (inverse) performance of the underlying index, assumed a fixed marginable equity of $100,000

________________________________

If you might want to be instantly notified about what’s happening in the markets and at TRADING THE ODDS, I encourage you to subscribe to my RSS Feed or Email Feed, and (or) follow me on Twitter.

xx

Disclaimer: Short E-MINI S&P 500 at time of writing.

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. The author of this website is not a licensed financial advisor and will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on the content of this website(s). Under no circumstances does this information represent an advice or recommendation to buy, sell or hold any security.

Add to Technorati Favorites

Leave a Reply

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