Daily Commentary - Posted on Tuesday, November 15, 2011, 10:53 PM GMT +1

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Nov Tuesday 15

SPY Down Week-to-Date on 1st and 2nd Session in Q4

With the @SP.P – S&P 500 Continuous Full Contract – down -1.47% on GLOBEX, it looked like another sharp move lower was in the cards today, but the market not only recouped almost all of its pre-opening losses already before the open, but managed a higher close as well (SPY – S&P 500 SPDR – up +0.50%).

Nevertheless the index has not started into the week on a weak note, but is still down -0.46% week-to-date on the second session of the week during the fourth quarter of the year, which – from a historical and statistical point a view – shows an impressive track record for posting at least one higher close over the course of the then following five sessions.

Table I below shows all historical occurrences and the SPY‘s performance over the course of the then following five sessions in the event the SPY closed lower at least -0.75% on the first session of a week (during the 4th quarter of the year), and was still down week-to-date on the then following second session of the week (like on Tuesday, November 15).

The SPY posted at least one higher close over the course of the then following five sessions (in this event until Tuesday, November 22) on all 35 occurrences (and on 4 out of every 5 occurrences already during the then following three days), closed higher 1.0%+ four days later on 30, but lower -1.0%+ on only 5 occurrences (for a 6 : 1 ratio), and finally never looked back and did not post a single close below the trigger days close during the next five sessions on 15 out of 35 occurrences.

Conclusion(s): When the setup listed above had been triggered in the past, the then following session (in this event Wednesday, November 16) had been the weakest one (but not necessarily forecasting a down-day) of the period under review (Up vs. Down and 1.0% percentage-wise changes), but the market might be gaining strength again (latest) at the end of the week (in this event on option expiration, Friday, November 17), and especially right at the start of the next week.

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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