Intraday Stats - Posted on Wednesday, November 9, 2011, 7:25 PM GMT +1

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Nov Wednesday 9

Implications of Fear ($VXO) and a Lower Close

Again a couple of news from China and Italy (Italy 10-Year Bonds up over 10% this morning) are driving markets lower today. At time of writing (01:00 PM ET) the SPY is down -2.24%, while the S&P 100 Volatility Index (VXO) – like the S&P 500 Volatility Index (VIX) better know as the Fear Index – is up more than 20.0%.

Should this sell off actually persist into the close, a favorable trading opportunity might be presented on tomorrow’s (Thursday, November 10) session (in fact on a lower open or additional weakness on the GLOBEX overnight session). Table I below shows all historical occurrences and the SPY‘s intraday performance on the then following sessions (in this event  on Thursday, November 10) in the event the VXO closed higher 21.0%+, while the SPY lost -2.0%+ on the close.

 

Out of 41 occurrences since 1990, the SPY was always trading above the previous session’s close at least once during the then following regular session, but had its difficulties to penetrate its previous session’s high (it managed a higher high on only 2 occurrences). In addition, it penetrated its previous session’s low on every 3 out of 4 occurrences, both significantly worse than the market’s at-any-time chance to post a higher high and a higher low.

Conclusion(s): Should this sell off actually persist into the close (and leaving any news out of consideration), a (significantly) lower open on Thursday, November 10, or any follow-through of today’s weakness on tomorrow’s GLOBEX session might provide a favorable buying opportunity, targeting an exit price at or above today’s close.

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 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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