Daily Commentary - Posted on Thursday, February 11, 2010, 12:28 PM GMT +1

2 Comments


Feb Thursday 11

President's Day – But Not For The Markets

In full compliance to historical probabilites and odds, US major market closed lower on last Monday’s session immediately following a session where the SPY had posted an intraday low at least -1.75% below the previous sessions close, but closed positive on the day (see my posting  Recovery Days and Short-Term Outlook).

Another interesting calendar (exchange holiday) effect will be triggered on today’s (Thursday’s) close.

Table I below shows the SPY‘ historical performance (since 01/01/1990) over the course of the then following five sessions assumed one would’ve bought the SPY on the close two sessions (like today) before the US markets will be closed due to the President’s Day holiday (next Monday).

Interesting to note that the SPY closed lower on the then following session (the session immediately preceding the President’s Day holiday) on 17 out of the last 20 occurrences, and posted at least one lower close than the trigger day’s close (Thursday’s close) over the course of the then following five sessions on 18 out of those 20 occurrences for a probability of 90.00%, significantly above the at-any-time probability of 71.12% for at least one lower close over the course of the then following five sessions (those two occurrences where the SPY never looked back over the course of the next five sessions are marked with an asterisk).

In addition, the setup related probability (60.00%) for posting at least one higher high over the course of the then following five sessions significantly undercuts the respective at-any-time probability of 78.29%, while the setup related probability (80.00%) for posting at least one lower low over the course of the then following five sessions significantly exceeds the respective at-any-time probability of 70.13%

Especially with respect to those sessions immediately preceding and following the President’s Day, with a Profit Factor never exceeding 0.30, Distribution of Returns barely exceeding the 40.00% mark (the median trade shows a significantly lower rate of return / negative magnitude of change than the median trade (=50%) within the at-any-time distribution of daily returns, and Top 10% Winners and  Top 10% Losers significantly below /above the appropriate percentage of 10% (means a lot more than approprite are among the top 10% of the worst performing at-any-time sessions, and a lot less than approprite are among the top 10% of the best performing at-any-time sessions since 1990), odds are lopsided in favor of a negative outcome – or at least pointing to limited upside potential – in the Friday to next Wednesday’s time frame.

But the problem with those calendar effects is to find a reasonable, market related justification why probabilities and odds are sometimes skewed in one or the other direction.

Successful trading,
Frank

________________________________

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: 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.

Add to Technorati Favorites

m4s0n501

Comments (2)

 

  1. [...] How does the market typically behave around Presidents Day? __________ [...]

  2. bill says:

    Frank,

    one of your entry condition is as stated below in 2.3
    Is it all in AND condition because i tried only this peice
    “the index closed above it’s 19-day EMA (Exponential Moving Average) and
    the index did NOT post an intraday high less than -0.30% below the previous session’s high”

    and this resulted in negative 8.15% over 10 years.

    here is the code in amibroker – Len2 = 19;
    DayCloseAvg19 = EMA( Close , Len2);
    HighPCTChange = ((H – Ref(H,-1 ) ) / H ) * 100;
    LowPCTChange = ((L – Ref(L,-1 ) ) / L ) * 100;
    BuySetup = C > DayCloseAvg19 AND HighPCTChange > -.3;

    ,(2.3) the index closed above it’s 19-day EMA (Exponential Moving Average) and
    the index did NOT post an intraday high less than -0.30% below the previous session’s high, OR
    the index did NOT post an intraday low less than -0.50% below the previous session’s low, OR
    the >indicator 2indicator 3< close below zzz) and
    the index did NOT post an intraday high below the previous session’s high, OR
    the index did NOT post an intraday low less than -0.15% below the previous session’s low.

Leave a Reply

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

* Copy This Password *

* Type Or Paste Password Here *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>