Daily Commentary - Posted on Tuesday, November 8, 2011, 11:21 PM GMT +1

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Nov Tuesday 8

SPY – 4th Close in the Top Quartile

This is clearly a headline driven market. Early in the session the opening gap up (open greater than previous session’s high) was closed shortly (at first providing a favorable shorting opportunity), but when news came out that Italien’s prime minister Berlusconi will probably step down, the market turned around again and never looked back.

The SPY (S&P 500 SPDR) closed above the open and posted a higher low both on the fifeth consecutive session, and closed in the top quartile of its daily range on the fourth consecutive session, each time at least 1.0% above the intraday low, and at least (bearish forecasts were clearly a miss) in full compliance with historical probabilities and odds when opening with a gap up immediately following a session where volume in SPY SPDR came in at a 1-month low in the past (see my intraday posting SPY w/ Gap Up after Low(est) Volume).

I’am gradually getting hesitant to come up with any negative forecast (just kidding) – for the time being the bulls are clearly in charge – . Table I below shows all historical occurrences and the SPY‘s performance over the course of the then following 1 to 5 sessions in the event the SPY closed in the top quartile of its daily range on four consecutive sessions.


Out of 14 occurrences, the SPY closed higher (again) the next day on 10 occurrences, and up to now never giving back more than -0.55% of its previous session’s gains (if it happened to be an up-day). In addition, the SPY posted at least one higher close over the course of the then following five sessions on all but one (the most recent one) occurrence, and closed lower -1.0%+ three days later on only 1 occurrence, while being up 1.0%+ on 5 occurrences.

Conclusion(s): For the time being the bulls seem to be clearly in charge, and there will probably be some more upside over the course of the next couple of days …

May be more tomorrow in the morning, I’ve to get some sleep now (it is almost midnight in Germany).

Successful trading,



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).



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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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