Daily Commentary - Posted on Monday, November 23, 2009, 11:21 PM GMT +1

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Nov Monday 23

TRADING THE ODDS on Tuesday – November 24, 2009

On Monday’s session we couldn’t have asked for more: With Monday’s intraday low +0.78% above Friday’s intraday high, the ES E-MINI S&P 500 left the (expected) unfilled (opening) gap up and closed on a strong note +1.01% above Friday’s high, but posted it’s intraday low  – unexpectedly – during the final hour of the session instead of the – expected – first hour due to some selling pressure during the second half of Monday’s session and a close in the lower half of the daily trading range (see my posting TRADING THE ODDS on Monday – November 23, 2009 ).

2009-11-23-indices

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The following setups (among others) were triggered on Monday’s close:

No. INDEX SETUPS TRIGGERED
1 E-MINI S&P 500 left an unfilled gap up (intraday low > previous session’s high) greater than +0.75%
2 E-MINI S&P 500 left an unfilled opening gap up (intraday low > previous session’s close) greater than +1.00%
3 E-MINI S&P 500 closed at least +1.00% above the previous session’s high
4 E-MINI S&P 500 left an unfilled opening gap up immediately following an unfilled opening gap down
5 E-MINI S&P 500 left an unfilled gap up, and Puts traded on a downtick outnumbered Puts traded on an uptick by a factor of greater than 1.75

* ) : –

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

Table I below shows the ES E-MINI S&P 500’s intraday performance (since 01/06/2001) concerning the open, the intraday high, the intraday low, the end of the first hour of the session in comparison to the previous session’s close and the pre-opening low on GLOBEX on those sessions where setups S1 (‘the ES E-MINI S&P 500 left an unfilled gap up greater than +0.75%‘) had been triggered on close of the previous trading day in the past.

2009-11-23-ES-S1i

It is interesting to note that – since 01/06/2001 and with respect to the then following session (in this event on Tuesday, November 24) – the ES E-MINI S&P 500

  • opened lower on 9 out of the last 11 occurrences,
  • never left an unfilled opening gap up,
  • was trading below the previous session’s close at the end of the first hour on 10 out of the last 11 occurrences,
  • posted a median low of -0.84% (significantly lower than the at-any-time median low on GLOBEX of -0.26% only) below the previous session’s close on the then following GLOBEX session.

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Table II below shows the ES E-MINI S&P 500’s intraday performance (since 01/01/2005) concerning the open, the intraday high, the intraday low, the end of the first hour of the session in comparison to the previous session’s close and the pre-opening low on GLOBEX on those sessions where setups S5 (‘the ES E-MINI S&P 500 left an unfilled gap up, and Puts traded on a downtick outnumbered Puts traded on an uptick by a factor of greater than 1.75′) had been triggered on close of the previous trading day in the past.

2009-11-23-ES-51i

It is interesting to note that – since 01/06/2001 and with respect to the then following session (in this event on Tuesday, November 24) – the ES E-MINI S&P 500

  • opened lower on 20 out of the last 24 occurrences (and not up greater than +0.41%),
  • posted an intraday high of greater than +1.00% on only 4 out of the last 24 occurrences,
  • was regularly trading below the previous session’s close at the end of the first hour, and never managed a gain of greater than +0.81% at the end of the first hour on any of those 61 occurrences since 01/06/2001.

Due to the significantly above-average probability and odds for some weakness before or on the open on Tuesday’s session, or during the first hour of Tuesday’s session, a sell signal was triggered on close of Monday’s session.

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Bottom line:

At least based on historical probabilities and odds and the market’s regular 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 until the end of the first hour on Tuesday, November 24 is  negative, while the outlook with respect to the close is mixed (no edge provided).

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

Successful trading,
Frank

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Summary of potentially tradable edges for Tuesday – November 24, 2009

DATE TIME WHAT ACTION WHY ENTRY
STOP 1)
Pos. Size 2) 3)
11/230/2009 04:00 PM E-MINI S&P 500 SHORT see setups above 1104.00 (-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
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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)
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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 short DAX German Aktien Index) 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. forex robot says:

    Nice post & nice blog. I love both.

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