As promised this will be the third part of How To Make Millions (in %) Trading The SPYDER – Seasonalities (I) and How To Make Millions (in %) Trading The SPYDER – Holiday Effects . The third part will deal with potential edges provided on the long and/or short side of the market shortly before or (immediately) following BLS (Bureau of Labor Statistics) news releases (Employment Situation / Job Report, and Consumer Price Index), in order to evaluate if – and to what extent- these periodical events had – and probably will have in the future – a (significant) impact on the direction and magnitude of the next session’s change.
Please take into account that the dates presented below and their respective performance figures do NOT reflect the index’ performance on the the session itself, but the next session’s performance instead, means if -and to what extent- the respective date (periodical event) would’ve provided a favorable opportunity for going long or short on the close targeting a higher/lower close on the then following session.
This time the stats take into account ‘real’ (effective) dates, no assumption is made about the ‘first Friday of a month’ (which regularly matches the release of the employment data report, but approximately 3 times a year both dates won’t match). The respective dates are available on the web at BUREAU OF LABOR STATISTICS.
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1. EMPLOYMENT SITUATION
Table I below shows the S&P 500‘ historical performance with respect to the Bureau of Labor Statistics’ release of the national Employment Situation (Job Report), assumed one would’ve bought the S&P 500
- Setup 1: on the close of the session immediately preceding the release date,
- Setup 2: on the close of the session immediately preceding the release date in the event the S&P 500 closed lower at least -0.50%,
- Setup 3: on the close of the session immediately preceding the release date in the event the S&P 500 closed lower,
- Setup 4: on the close of the session immediately preceding the release date in the event the S&P 500 closed higher,
- Setup 5: on the close of the session immediately preceding the release date in the event the S&P 500 closed higher at least +0.50%,
, for the time period between 01/01/1958 and 01/06/2010 (the last 52 years).
It is interesting to note that the S&P 500‘ performance on the session immediately preceding the news release is highly indicative (providing a statistically significant edge on the long and short side) for the release date’s performance, or in other words positively correlated: a higher close on the session immediately preceding the news release date is regularly followed by another higher close on the release date, and vice versa. And the weaker/the stronger the S&P 500 closes on the preceding session, the worse (lower) / better (higher) the next session’s returns (probabilities and odds) are (setups 2 to 5 show a t-score exceeding the +/- 1.645 mark for statistical significance, means there is a very low probability that the out-/under-performance in comparison to the general market occured by chance only).
Table II below now shows the S&P 500‘ historical performance with respect to the Bureau of Labor Statistics’ release of the national Employment Situation (Job Report), assumed one would’ve bought the S&P 500
- Setup 1: on the close of the release date,
- Setup 2: on the close of the release date in the event the S&P 500 closed lower at least -0.50%,
- Setup 3: on the close of the release date in the event the S&P 500 closed lower,
- Setup 4: on the close of the release date in the event the S&P 500 closed higher,
- Setup 5: on the close of the release date in the event the S&P 500 closed higher at least +0.50%,
, for the time period between 01/01/1958 and 01/06/2010 (the last 52 years).
It is again remarkable that the S&P 500‘ performance on the news release’ session is highly indicative (providing an ever better statistically significant edge on the long side) for the then following session as well, or in other words positively correlated again: a higher close on the news release date is regularly followed by another higher close on the session immediately following the release date, although this time the downside doesn’t show a statistically significant edge. And again: the stronger the S&P 500 closes on the news release date, the better (higher) the next session’s returns (probabilities and odds), with even higher t-scores.
Conclusion with respect to the market model: The model will take a long/short position on close of the session immediately preceding the Bureau of Labor Statistic’s release of the national Employment Situation in the event the S&P 500 closes higher/lower (short-term trend-following), and a long position on the close of the news release’ session in the event the S&P 500 closes higher (these findings are brand new, so at the current state the market model is short with respect to next Monday’s session although probabilities and odds are histroically tilt in favor of another higher close). At a later stage position sizing will take respect to the fact that the odds are significantly tilt in favor of the upside/downside depending on the magnitude of change (the higher/lower the S&P 500 closed on the news release session, the better for the next session’s performance) on the news release session.
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2. COMSUMER PRICE INDEX
Table III below shows the S&P 500‘ historical performance with respect to the Bureau of Labor Statistics’ release of the Consumer Price Index, assumed one would’ve bought the S&P 500
- Setup 1: on the close of the session immediately preceding the release date,
- Setup 2: on the close of the session immediately preceding the release date in the event the S&P 500 closed lower at least -0.50%,
- Setup 3: on the close of the session immediately preceding the release date in the event the S&P 500 closed lower,
- Setup 4: on the close of the session immediately preceding the release date in the event the S&P 500 closed higher,
- Setup 5: on the close of the session immediately preceding the release date in the event the S&P 500 closed higher at least +0.50%,
, for the time period between 01/01/1958 and 01/06/2010 (the last 52 years).
It is interesting to note that the S&P 500‘ performance on the session immediately preceding the news release is highly indicative (providing a statistically significant edge especially with respect to the short side) for the release date’s performance, or in other words positively correlated: a higher close on the session immediately preceding the news release date is regularly followed by another higher close on the release date, and vice versa.
Table IV below shows the S&P 500‘ historical performance with respect to the Bureau of Labor Statistics’ release of the Consumer Price Index, assumed one would’ve bought the S&P 500
- Setup 1: on the close of the release date,
- Setup 2: on the close of the release date in the event the S&P 500 closed lower at least -0.50%,
- Setup 3: on the close of the release date in the event the S&P 500 closed lower,
- Setup 4: on the close of the release date in the event the S&P 500 closed higher,
- Setup 5: on the close of the release date in the event the S&P 500 closed higher at least +0.50%,
, for the time period between 01/01/1958 and 01/06/2010 (the last 52 years).
As is was the case with respect to the release of the national Employment Situation, it is again interesting to note that the S&P 500‘ performance on close of the news release’ session is indicative (providing an edge on the long side, although not as statistically significant as it was the fact for the employment situation) for the session immediately following the release date.
Conclusion with respect to the market model: The model will take a long/short position on close of the session immediately preceding the Bureau of Labor Statistic’s release of the Consumer Price Index in the event the S&P 500 closes higher/lower (short-term trend-following), and a long position on the close of the news release’ session in the event the S&P 500 closes higher.
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For those interested in, the model’s signals will be posted from January 4, 2010 onward regularly shortly before the close (but even if posted shortly after the close, the SPY is still available for trading with good liquidity and narrow spreads of regularly $0.01) via Twitter Update by following a new Twitter account @Strategy_I . (making further improvements to the model – e.g. optimization of the short side and reducing the chance of overfitting – as well as introducing position sizing, leverage, abnormal market filters, implementing buy/sell stops and probably making the model ‘adaptive‘ will be an ongoing process in 2010)
But please be reminded that past performance is never an indication (leave alone a guarantee) for future performance, and for good reason the CFTA and NFA (COMPLIANCE RULE 2-29: USE OF PROMOTIONAL MATERIAL CONTAINING HYPOTHETICAL PERFORMANCE RESULTS) requires all members (which I’m not) to explicitly reference to limitations, risks, lack of liquidity, among others, and publish a respective disclaimer.
Successful trading,
Frank
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Disclaimer: No position in the securities mentioned in this post 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.
