Daily Commentary - Posted on Thursday, January 27, 2011, 8:18 PM GMT +1

4 Comments


Jan Thursday 27

SPX and January’s Turn-of-the-Month

The S&P 500 posted a fresh 52-week high on Wednesday, January 26, 2011, and possibly (at time of writing) on Thursday, January 27 as well.

As already shown in my last posting (see … What a Difference a Fresh 52-Week High Makes …), the S&P 500 at a fresh 52-week high was regularly indicative for a continuation of the then recent up-move over the course of the then following five sessions in the past, but another impressive seasonality caught my eye today.

Table I below shows all occurrences (since 1930) and the S&P 500’s performance over the course of the then following 1 to 5 sessions in the event the S&P 500 closed at a fresh 52-week high on the 3rd or 4th last session of January in the past (like on Wednesday, January 26, 2011, and /or on Thursday, January 27), which was already triggered on Wednesday’s close independently from what might happen over the remainder of Thursday’s session (approximately 1.5 hours left at time of writing).


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

I think the respective probabilities and odds don’t require much commentary. The S&P 500 closed higher on the 2nd last and the last session in January on 11 out of 14 occurrences, and four days later (the 2nd session in February) on all occurrences, with one exception only five sessions later.

In addition, the S&P 500

  • never closed lower -0.59%+ below the 3rd last session of January over the course of then then following five sessions on all 14 occurrences, but was trading 1.0%+ four sessions later on 9 out of those 14 occurrences , and
  • did not look back and did not post a single close below the trigger day’s close on 9 out of 14 occurrences.

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But another setup (independently from the FOMC announcement session and/or a 52-week high) will probably trigger a short-term bullish setup as well. Provided no sell-off during the remainder of Thursday’s session, table II below hows all occurrences (since 1930) and the S&P 500’s performance over the course of the then following 1 to 5 sessions in the event the S&P 500 was up week-to-date and month-to-date on the 3rd last session of January in the past.


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

Quite impressive again, despite a respectable sample size of 34 occurrences (years). When the S&P 500 was up week-to-date and month-to-date in the past,

  • the S&P 500 closed higher three, four and five sessions later on more or less 3 out of every 4 occurrences (75% of the time),
  • was up 1.0%+ three and four sessions later (the first and second session of February) on 14 and 17 occurrences, but down -1.0%+ on only 1 and 3 occurrences respectively,
  • the S&P 500 did not look back and did not post a single close below the trigger day’s close on 16 out of 34 occurrences (or almost 50% of the time), but did not post a single close above the trigger day’s close only once, and last but not least
  • downside potential over the course of the then following five sessions was regularly limited (max. loss -1.61%).

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Conclusions:
January’s turn-of-the-month seasonality shows an impressive bullish bias in the event the S&P 500 closed at a fresh 52-week high on the 4th or 3rd last session of January, and /or was up week-to-date and month-to-date on the 3rd last session of January in the past. Therefore: the short-term trend is still up.

Successful trading,

Frank

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If the information provided is helpful for your own trading business, any donation to my Be it! Children’s Charitable Foundation is much appreciated (donations can be sent via PayPal).

Sincere thanks are given to all of you.

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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 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).

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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.

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

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Comments (4)

 

  1. […] This post was mentioned on Twitter by Frank Hogelucht and Trader Club Tirol, Quant Blogs. Quant Blogs said: Trading the Odds: SPX and January’s Turn-of-the-Month http://bit.ly/dJjsza […]

  2. Rick says:

    How would you factor in the events unfolding in Egypt could play into these probabilities?

    • TradingTheOdds says:

      Rick,

      I don’t factor in any news or ‘force majeure’. If you look back into history, there was always (day by day) a reason why people were selling or buying (regular fundamental news like the Confidence Index or Jor Report, earnings, ‘force majeure’ like the financial crisis, 9/11, …). In a couple of weeks or month, the sell-off last Friday would simply be a failure of otherwise bullish seasonalities.

      If the up-trend would’ve been that strong, current events unfolding in Egypt wouldn’t have led to the biggest loss since August 2010.

      Best,
      Frank

  3. GT says:

    $NDX 2467.95 close @ 1/31/12, 52 week hi close, do you have study for next 5 trading sessions?

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