Daily Commentary - Posted on Saturday, November 27, 2010, 9:49 PM GMT +1

3 Comments


Nov Saturday 27

After Hours Sell-off in ES E-Mini Futures

Obviously the short-term negative setup triggered on last Wednesday’s close ( an unfilled gap up immediately preceding a holiday, see Unfilled Gap prior to (Exchange) Holiday ) dominated Friday’s post-Thanksgiving shortened session.

The SPY not only closed down -1.16% exactly on the intraday low, but additionally ES E-mini (S&P 500) futures were dumped immediately after the close and lost almost -0.50% between 1:00 pm and 1:15 pm ET.

Table I below shows those occurrences and the SPY‘s historical intraday performance (since 01/01/1990) with respect to the open (‘open vs. prev. close‘), a potential higher high (‘high vs. previous high‘), a potential lower low (‘low vs. previous low‘), during the 1st hour of the session (‘1st hr. vs. open‘), at the end of the first hour (‘1st hr. vs. prev. close‘), and on the close (‘close vs. prev. close‘) on those sessions where the SPY closed in the bottom percentile (bottom 10%) of its daily trading range (independently from a higher or lower close and / or the daily change), and ES E-mini futures lost at least -0.40% during the last 15 minutes (after hours, between 4:00 pm and 4:15 pm ET) of the GLOBEX session in the past .

Although the number of occurrences is limited and too small to read anything statistically significant into it, it is at least interesting to note that on the then following session (in this event on Monday, November 29)

  • … upside potential was regularly limited to say the least (means: was more or less non-existent) ; the SPY managed a higher high only once (an outlier on 10/28/2008 where the SPY closed up 11.69%), but posted a lower higher at least -1.0% below the previous session’s high on 11 out of 15 occurrences ;
  • … the same pattern applies to the intraday low: the SPY managed a higher low only once, but posted a lower low at least -1.0% below the previous session’s low on 10 out of 15 occurrences ;
  • … whatever happens on the open, sellers will probably gain the upper hand again sometime during the first hour of the session ; out of 15 occurrences, the SPY was trading below the open at the end of the first hour of the session on 11 occurrences, and below the previous session’s close on 10 occurrences ; and finally
  • … the SPY closed lower on 10 out of 15 occurrences (or 66.67% of the time).

Conclusions:

From a statistical and historical point of view, a close at the intraday low and an after hours sell-off of ES-mini futures doesn’t bode well for the SPY‘s performance on the then following session. Although no significant edge is provided with respect to a higher or lower open, probabilities and odds are tilt in favor of (probably significantly) lower prices at least once during the then following session. But Monday’s session will probably be again significantly affected by any (or the lack of) news and / or potential intensification of latent crisis (debt crisis in the euro zone or the crisis between North and South Korea).

Enjoy your weekend, and 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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Comments (3)

 

  1. […] This post was mentioned on Twitter by Frank Hogelucht and Trader CTC, Quant Blogs. Quant Blogs said: Trading the Odds: After Hours Sell-off in ES E-Mini Futures http://bit.ly/gUZkgM […]

  2. leon says:

    not to mention the ongoing investigation into insider trading. although the market was able to continue higher the charts of xle, c, and jpm have been telling a different story. it looks as if someone knew something in advance. will seasonality overcome all of this?

    what do your studies say?

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