Daily Commentary - Posted on Monday, October 5, 2009, 11:13 PM GMT +1

3 Comments


Oct Monday 5

Trading the Odds on Tuesday – October 6, 2009

On Monday’s session the market fully complied to the bullish outlook based on those setups which were triggered on Friday’s close (e.g. three consecutive closes below the previous session’s low, three consecutive lower lows and lower highs,  see my posting  Trading the Odds on Monday – October 5, 2009).

The ES E-MINI S&P 500 opened higher +0.22%, posted an intraday low of -0.05% below and an intraday high of +1.64% above Friday’s close, and finally closed higher +1.49% on the day, while the Nasdaq 100 (significantly under-performing) closed higher +0.79% (S&P 500 +1.49%, DJ Ind. +1.18%, Russel 2000 +1.88%, SOX Philadelphia Semiconductor Index +2.12%, BKX Philadelphia Bank Index +3.21%).

Market breadth in S&P 500 stocks was haevily lopsided on the upside, with S&P 500 Advancing Issues/Declining Issues at 7.34 and Advancing Volume/Declining Volume at 7.24 (S&P 500 TRIN / Arms Index at 1.07). Institutions and commercial traders were notably absent on Monday’s session, but although it was close, the ‘low volume setup‘  (10-day low) on S&P 500 block trades (see my Twitter Update) was not triggered at today’s close (the total number of block trades, the total volume on block trades and total volume in listed stocks posted a 5-day low and came in significantly lower than on Friday’s session).

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Unfortunately Monday’s session did not leave much to lean on short term. All intermediate-term bullish setups fell off the board, and all streaks of at least three lower lows/highs/closes were broken (in a positive sense) as well.

At least notable was the fact that the NDX Nasdaq 100 under-performed the S&P 500 by a wide margin of at least 0.70% on a session where the ES E-MINI S&P 500 closed higher at least +1.25%.

Table II below shows the ES E-MINI S&P 500 intraday performance (since 01/01/1990) concerning the open, the (end of the) first hour compared to the previous session’s close, the (start of the) last hour compared to the previous session’s close, the last hour (between 3:00 PM and 04:15 PM) and on the close (in chronological order) on those sessions (in this event Tuesday, October 6) where the NDX Nasdaq 100 had under-performed the S&P 500 by a wide margin of at least 0.70% on a session where the ES E-MINI S&P 500 closed higher at least +1.25% in the past.

2009-10-05-ES-S21i

Recent occurrences show a lot of red during all intraday time frames of the then following session (although the associated t-scores do not exceed the +/-1.645 mark for statistical significance), and the market regularly traded flat to down the next day.

The ES E-MINI S&P 500 was trading above the previous session’s close going into the last hour of the then following session on only one out of the last 13 occurrences,  and closing higher more than +1.0% on only three while closer lower at least -1.0% on 13 out of the last 25 occurrences. And even in the event the market was able to show some follow-through of the previous session’s gains, upside potential was regularly limited.

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Bottom line:

At least based on historical probabilities and odds and the market’s regular performance on the session after the Nasdaq 100 significantly under-performed the S&P 500 on an otherwise bullish session, the outlook concerning the ES E-MINI S&P 500 performance on close of Tuesday, October 6 is slightly negative (at least a short-term consolidation of Monday’s gains seems to be more than likely).

Successful trading,
Frank

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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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Comments (3)

 

  1. thegapper says:

    so, how does a 1% gap up affect these odds??

    • thegapper,

      since 01/01/1990 there were only 7 occurrences where the ES E-MINI S&P 500 gapped higher on the open more than +0.75% (probably today) following a session where it closed up more than +1.25% while out-performing the Nasdaq 100 by 0.70% or more (like Tuesday’s session).

      The ES E-MINI S&P 500 closed higher on 5, and lower on the last 2 occurrences (both with a loss of more than -1.0%). On 5 out of those 7 occurrences the ES E-MINI S&P 500 showed a negative performance during the first hour of the session, so gap on the open might provide a short-term (with respect to the first hour of the session) opportunity on the short side.

      Best,
      Frank

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