Intraday Stats - Posted on Wednesday, November 9, 2011, 10:50 PM GMT +1
Intraday Opportunity after a Sell-off
Again a couple of news from China and Italy (Italy 10-Year Bonds up over 10% this morning) drove markets significantly lower today.
The SPY (S&P 500 SPDR) closed lower -3.69%, while at the same time the S&P 100 Volatility Index (VXO) closed up +38.46%. On the NYSE there were 8 declining issues for every advancing issue, and declining volume outnumbered advancing volume by a wide (to be polite) margin of 40 : 1.
But as already posted during the day ( see Implications of Fear ($VXO) and a Lower Close ), today’s severe sell-off might provide a favorable trading opportunity on tomorrow’s (Thursday, November 10) session (in the event of 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 (‘Effective Day‘, in this event on Thursday, November 10) in the event the SPY closed lower -3.50%+, at the same time near its intraday lows (bottom 12.5% of its intraday range).
Out of 31 occurrences since 1990, the SPY was always trading at least +0.70% above the previous session’s close at least once during the then following regular session (and ≥ +1.0% on 28 occurrences, or almost 90% of the time), 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 4 out of every 5 occurrences, both significantly worse than the market’s at-any-time chances for posting a higher high and a higher low.
Table II below shows all historical occurrences and the SPY‘s intraday performance on the then following sessions (‘Effective Day‘, in this event on Thursday, November 10) in the event the NYSE Adv./Decl. Issues came in 1 : 8 (or even worse), at the same time NYSE Adv./Decl. Volume came in 1 : 40 (or even worse), not taking into consideration any price action (e.g. the magnitude of change on the close).
Out of 16 occurrences since 1990, the SPY was always trading at least +0.64% above the previous session’s close at least once during the then following regular session (and ≥ +1.0% on 11 occurrences), but had (again) its difficulties to penetrate its previous session’s high (it managed a higher high on only 1 occurrence). In addition, it penetrated its previous session’s low on 2 out of every 3 occurrences, both significantly worse than the market’s at-any-time chances for posting a higher high and a higher low.
Conclusion(s): Aa (significantly) lower open on Thursday, November 10, and/or any follow-through of today’s weakness on tonight’s GLOBEX session might provide a favorable buying opportunity, targeting an exit price at least +0.70% above today’s close (not taking into account any news and headlines).
Disclosure: No position in the securities mentioned in this post at time of writing.
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).
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.