Daily Commentary - Posted on Thursday, January 13, 2011, 10:44 AM GMT +1

1 Comment


Jan Thursday 13

2 Sessions w/ Extraordinary Strength

Up-front I’d like to express a personal petition:

On December 14, 2010, I’ve founded the ‘Be it! Children’s Charitable Foundation‘ (with an initial capital of EUR 100,000), located in Munich, Germany, being awarded state recognition, being under federal supervision, committed to providing children and juveniles with a brighter future through education, by strengthening their health and welfare, and whatever else is needed and doable.

The blog has been and will be (for the foreseeable future) free of charge, you’ll never see any ads, I don’t accept link exchanges or sponsorships, so the blog does not provide any source of income, but takes a lot of time and money to keep it alive.

Therefore if the blog is (or has been) in any way helpful for your own trading business, any assistance for the Be it! Children’s Charitable Foundation is much appreciated. Donations can be sent via PayPal (widget on the top right). Sincere thanks are given to all of you.

_______________________

In full complicance to historical probabilities and odds calling for a higher close over the course of the then following three sessions when the S&P 500 closed lower three sessions in a row, but with a close steadily improving concerning its respective intraday level (see my last posting Three Lower Closes but Improving …), the S&P 500 displayed an extraordinary strength during the most recent two sessions.

The SPY (S&P 500 SPDR) opened above the previous session’s high and closed higher two days in a row (the most recent session with a gain ≥ 0.75%), and left an unfilled opening gap up (intraday low above the previous session’s close) on the most recent session.

Table I below shows all occurrences and the SPY (S&P 500 SPDR)′s historical performance (since 01/01/1990) over the course of the then following 1, 5, 10 , 15 sessions and 1 month later (and the minimum number of sessions – if any – until the index posted a first higher close above the trigger day’s close), assumed one went long on close of a session where the SPY (S&P 500 SPDR) opened above the previous session’s high and closed higher two days in a row (the most recent session with a gain ≥ 0.75%), and left an unfilled opening gap up (intraday low above the previous session’s close) on the most recent session in the past (like on January 12, 2011).


+ no close below trigger day’s close during period under review
no close above trigger day’s close during period under review

When the SPY displayed such an extraordinary strength in the past, this has regularly not been a flash in the pan, and the market almost always remained on firm ground settling higher one month later. The SPY closed at an even higher level 2 weeks later on the last 8 and the last 13 out of 15 occurrences, 3 weeks later on the last 12 and the last 14 out of 15 occurrences, and generally on 3 out of every 4 occurrences (20 out of 27 occurrences to be exact), and settled higher one month later on 24 out of 27 occurrences (or 88.89% of the time), thereof 23 (out of the last 24) with a gain better than +1.0%.

In addition, the SPY couldn’t manage at least one higher close over the course of the then following one month on only 1 out of those 27 occurrences, but never looked back and did not post a single close below the trigger day’s close on 6 occurrences.

Conclusions:

Besides the fact that the intermediate- and long-term outlook (with respect to Janaury, the first quarter and the entire year) is already positive due to positive seasonalities and market sentiment (see The Third Year of the Presidential Cycle, A Perfect (Bullish) Score, if …, Will Too Many Bulls Really Make a Bear ?), probabilities and odds are tilt in favor of some additional upside over the course of the next month, and buying the dip may remain the prevailing strategy for the time being.

Successful trading,

Frank

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

________________________________

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.

________________________________

Remarks: Due to their conceptual scope – and if not explicitly 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).

________________________________

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)

________________________________

Comments (1)

 

  1. Aly S. says:

    Congrats on doing a great thing by starting a charity with what looks to be a wonderful goal to strive for.

    Your blog work is very much appreciated and I will be delighted to make a donation.

    Thank you for all that you do.

Leave a Reply

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