Daily Commentary - Posted on Monday, February 14, 2011, 10:42 PM GMT +1

1 Comment


Feb Monday 14

S&P 500 at 52-Week High at Start of OPEX Week

The S&P 500 closed modestly higher today (+0.24%) – fully compliant to historical probabilities and odds (see ‘Successful Investing Is Anticipating the Anticipations of Others.’) -, on a(nother) fresh 52-week high for the second session in a row, right at the start of February’s option expiration (opex) week (which doesn’t bode well for the market’s performance over the remainder of the week).

Table I below shows the S&P 500’s performance (since 1974 ; in 1973 standardized exchange traded call options were released for trading by the Chicago Board of Options Exchange (CBOE) and the Options Clearing Corporation (OCC)), the number of sessions and the maximum gain | loss over the remainder of the week (‘Monthly Returns‘) in the event the S&P 500 posted a 52-week high on the last session immediately preceding opex week (in this event on Friday, February 11) and right at the start of opex week as well (on a back-to-back session) in the past, assumed one went long on close of the first session of opex week and back into cash on close of option expiration.

As previously stated (see ‘Successful Investing Is Anticipating the Anticipations of Others.’), the most recent two decades were characterized by a reversion to the mean tendency (the S&P 500 closed at a lower level on the last seven occurrences), while before 1990 trend-following was the play du jour). But downside potential was regularly limited as well.

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Conclusions:

I expect the market to be modestly lower on Friday, February 18.

And a short reminder: 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, see widget on the right side of the blog).

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.

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 (1)

 

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