Daily Commentary - Posted on Friday, October 22, 2010, 9:49 AM GMT +1

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Oct Friday 22

(Negative) Outlook for Friday, October 22, 2010

Just a quick pre-opening post with respect to the SPY‘s (S&P 500 SPDR) negative outlook on Friday, October 22, 2010.

On Thursday’s session the SPY posted a higher high, a higher low, was up +0.83% at the end of the first hour of the session, but lower -0.05% at the start of the last hour of the session (a sell-off during the mid part of the session), and closed below the midpoint (between the intraday high and the intraday low) of the session, which historically shows a (significantly) negative tendency with respect to the SPY‘s next session’s performance.

Table I below shows those occurrences and the SPY‘s historical intraday performance (since 01/01/1990) with respect to the intraday low (low vs. previous close), the intraday high (high vs. previous close), a potential lower low (low vs. previous low), a potential higher high (high vs. previous high), at the end of the first hour of the session in comparison to the previous session’s close (1st hr. vs. prev. close), at the start of the last hour of the session in comparison to the previous session’s close (last hr. vs. prev. close), and on the close (close vs. prev. close) after the SPY had posted a higher high, a higher low, was up > +0.75% at the end of the first hour, but lower (< 0%) at the start of the last hour, and closed below the midpoint of the session in the past.

Especially noteworthy are the following pattern:

  • the SPY closed lower the next session on 10 out of 11 occurrences (or 91% of the time),
  • the SPY posted a lower low and a lower high on all of those 11 occurrences,
  • the SPY was trading at a lower level (or unchanged) at the end of the first and the start of the last hour on 10 out of 11 occurrences (vs. the previous close) (or 91% of the time),
  • (not shown) the SPY closed below the trigger day’s close at least once over the course of the then following 5 sessions on all of those 11 occurrences.

Conclusions:

Although 11 occurrences is nothing to read anything statistically significant into it, it nevertheless shows a significantly negative tendency with respect to the SPY‘s next session’s (intraday) performance. There is a high likelihood that yesterday’s intraday low will be penetrated on today’s (Friday’s) session, and any pre-opening higher prices (ES E-mini) or strength right at the start of today’s session might provide a favorable short-term selling (shorting) opportunity.

Successful trading,

Frank

Disclosure: No position in the securities mentioned in this post at time of writing.

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Remarks: Due to their conceptual scope – and if not explicitely stated otherwise – , all models/setups/strategies do not account for slippage, fees and transaction costs, do not account for return on cash and/or interest on margin, do not use position sizing (e.g. Kelly, optimal f) – they’re always ‘all in‘ – , do not use leverage (e.g. leveraged ETFs), do not utilize any kind of abnormal market filter (e.g. during market phases with extremely elevated volatility), do not use intraday buy/sell stops (end-of-day prices only), and models/setups/strategies are not ‘adaptive‘ (do not adjust to the ongoing changes in market conditions like bull and bear markets).

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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. 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.

I may or may not hold positions for myself, my family and/or clients in the securities mentioned here. Actions may have been taken before or after information is presented, and any opinions expressed in this site are subject to change without notice.

(Data courtesy of MetaStock , and for data import, testing, surveys and statistics I use MATLAB from MathWorks)

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  1. […] See original here: (Negative) Outlook for Friday, October 22, 2010 […]

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