Daily Commentary - Posted on Sunday, November 8, 2009, 10:44 PM GMT +1

1 Comment


Nov Sunday 8

TRADING THE ODDS on Monday – November 9, 2009 (Follow-Up)

A couple of minutes ago I noticed that there was another setup triggered on Friday’s close, in particular confirming the negative outlook with respect to the first part of Monday’s session (see my posting TRADING THE ODDS on Monday – November 9, 2009 ).

On Friday the ES E-MINI S&P 500 not only closed higher the fifth day in a row, the  ES E-MINI S&P 500 closed at least +0.90% above the open on a second day in a row as well (55 occurrences since 01/06/2001).

Table I below shows the ES E-MINI S&P 500’s intraday performance (since 01/06/2001) concerning the open, the intraday low, the end of the first hour of the session in comparison to the previous session’s close, the start of the last hour of the session in comparison to the previous session’s close, and the close on those sessions immediately following a session where the ES E-MINI S&P 500 had closed higher and at least +0.90% above the open on a back-to-back session in the past (in this event on Monday, November 9). A lot of red …

2009-11-06-ESS4i

It is interesting to note that – since 01/06/2001 and with respect to the then following session (in this event on Monday, November 9) – the ES E-MINI S&P 500

  • opened lower on 2 out of every 3 occurrences (and on 17 out of the last 21 occurrences),
  • was trading below the previous session’s close at the end of the first hour on 4 out of every 5 occurrences, and lower on 19 out of the last 21 occurrences,
  • was trading below the previous session’s close at the start of the last hour on 2 out of every 3 occurrences, and lower on 17 out of the last 21 occurrences,
  • closed lower on 37 out of those 55 occurrences.

The ES E-MINI S&P 500′ statistically significant (the respective t-score exceeds the -1.645 mark on the downside) under-performance during all stages of the then following session confirms the bearish case at least with respect to the first part of Monday’s session (including the pre-opening session on GLOBEX).

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Bottom line:

At least based on historical probabilities and odds and the market’s regular recent performance on the session after 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 at least until the end of the first hour of Monday’s session is negative, but probably with respect to a lower close as well.

A favorable short-term opportunity on the short side would be provided in the event of any pre-opening strength targeting a lower open or weakness during the first part of Monday’s session.

Successful trading,
Frank

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Summary of potentially tradable edges for Monday – November 9, 2009

DATE TIME WHAT ACTION WHY ENTRY
STOP 1)
Pos. Size 2) 3)
11/06/2009 04:00 PM E-MINI S&P 500 SHORT see setup S2/S3 above 1067.00 1075.00 (-18) $5,625

1) 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 loss order ; the inverse applies to a short position respectively
xx
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 ] ;

Margin requirements:
ES E-MINI S&P 500 (ES): Intraday Initial Margin = $2,250 ; Overnight Initial Margin = $5,625 ;
ES E-MINI Nasdaq 100 (NQ): Intraday Initial Margin = $1,750 ; Overnight Initial Margin = $3,500 ;
Russel 2000 Mini Futures (TF): Intraday Initial Margin = $2,500 ; Overnight Initial Margin = $5,000)
xx

3) Position size in units per $xxx of marginable equity; if the E-MINI S&P 500, the E-MINI NASDAQ 100 or Russel 2000 Mini Futures are 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

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Disclaimer: Short ES E-MINI S&P 500 and long volatility 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.

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Comments (1)

 

  1. Dan says:

    Frank,
    I found your blog a week ago and find the level of information you are providing on past pattern matching and probabilities very usefull. I truly appreciate all the work you are doing and then sharing through your blog. I hope all is well with you and that you will resume updating your blog soon.

    Thanks again!

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