Daily Commentary - Posted on Tuesday, December 6, 2011, 11:09 PM GMT +1

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Dec Tuesday 6

Bullish Setups and Seasonalities …

Although it seemed that the the SPY (S&P 500 SPDR) would defy historical probabilities and odds today by finishing the day with a strong bull rally into the close, the index gave back almost all of it’s intraday gains during the last hour of the session for a flat close (up +0.03%), compliant to past occurrences when the SPY did not open worse than -0.30% below (or above) the previous session’s high on six consecutive sessions in the past (see my last posting: Short-term Extended to the Upside).

But another bullish end-of-the-year setup had already been triggered on Monday’s close. Table I below shows all occurrences (since 1990) and the SPY‘s performance over the course of the then following four sessions, and for the remainder of the year as well in the event the SPY posted a higher low on six consecutive sessions, with the 6th one on a session in December of the respective year (but before the Christmas holiday in order to have at least a couple of remaining sessions for the year).

The SPY closed at a higher level three days later on 15 out of 20 occurrences (or 75% of the time), and closed out the year with a 1.0%+ gain on 9 instances, but was never down 1.0%+ (below the trigger date’s close).


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Although strictly speaking not being triggered, the SPY missed a close below the open on a third consecutive session today by a hairbreadth only, but from my perspective close enough to be taken into consideration.

Table II below shows all occurrences (since 1990) and the SPY‘s performance over the course of the then following four sessions and until the end of the week, in this event until Friday, December 9, in the event the SPY closed below the open three days in a row, with the 3rd one on a session in December of the respective year.

The SPY shows a significantly positive bias and remained on firm path over the course of the next couple of sessions (posting a higher close over the remainder of the week on almost three out of every four occurrences, and up 1.0%+ three days later on 12, but down 1.0%+ on 2 occurrences only), and closed at a higher level at the end of the respective week on 26 out of 31 occurrences.


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Conclusion(s)

The trend remains up, and I expect the SPY (S&P 500 SPDR) to close higher at least at some time during the week, if not on Friday, December 9.

Have a profitable week,

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). Index data (e.g. S&P 500 cash index) does not account for dividend and cash payments.

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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 Pinnacle Data Corp., and for data import, testing, surveys and statistics I use MATLAB from MathWorks)

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