Daily Commentary - Posted on Friday, December 2, 2011, 12:04 AM GMT +1

4 Comments


Dec Friday 2

December and Nonfarm Payroll Employment

My forecast for today’s sessions (‘… and a likely scenario on Thursday’s session might be an index trading (significantly) lower at least at some time during Thursday’s session, but closing near unchanged levels.‘) was almost close to perfection (unfortunately trading is all about being profitable, not about being right more often than wrong).

The SPY was trading in a tight range today, posting an intraday low of -0.45% below Wednesday’s close, but closed more or less unchanged (-0.02%).

Historically, tomorrow’s (Friday, December 2) release date of the nonfarm payroll employment figures shows a significantly positive bias. Since 1990, the S&P 500 closed higher on the December’s release date on 16 occurrences and lower on 5 occurrences (only), with five occurrences leading to a 1.0%+ gain, but never posting a 1.0%+ loss (in each case on the close).


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For a second time within the last couple of sessions, another bullish setup had been triggered on Thursday’s close: The S&P 500 refused to give back at least some of the previous sessions gains (means no loss -0.25%+ on the close, or a higher close) immediately following a session where volume associated with advancing issues accounted for more than 95%+ of the total volume on the NYSE. This happened only 13 times since 1990 – all post 2007 -, and ten (or 90%+) led to a higher close either one or two session later, with the S&P 500 never closing lower 1.0%+ one and two sessions later, but up 1.0%+ on 9 out of 12 occurrences.

Please note: The table below does not list the most recent occurrence triggered on today’s close (my data is not up-to-date yet).

Conclusion(s): Probabilities and odds are tilt in favor of some follow-through on the upside on Friday, December 2.

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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Comments (4)

 

  1. Ethan Brown says:

    Hi Frank,

    I enjoy the studies on this blog quite a bit. I tried to replicate the Non-Farms result above using both back-adjusted E-Mini futures (ES_F) as well as with the SPDR S&P ETF (SPY). In both cases, it appears as though the close-to-close changes on the Fridays in question are markedly different than the changes for the S&P index. In fact, in both cases, the strategy is a clear loser, winning only 39% and 43% in the SPY (back to 1993) and ES_F (back to 1997), respectively. I’d be interested in further thoughts on why there might be such a difference between the price movement of the index and that of the exchange-traded contracts.

    Regards,
    Ethan

    • TradingTheOdds says:

      Ethan,

      in fact there is no difference. The table below shows the SPY’s (S&P SPDR) performance (instead of the S&P 500 cash index) on the Dec. release date of the non-farm payroll figures.

      Test

      This might be a data issue (hopefully on your side) …

      Best,
      Frank

  2. Ethan Brown says:

    I stand corrected! I went back to re-examine and found the data error. Thanks for showing the SPY result – I was able to reproduce the same output as you did above. I look forward to continuing to read your blog posts.

    • TradingTheOdds says:

      Ethan,

      thanks, and it is my pleasure.

      There is always room for failure, beginning with the reliability of one’s data provider, import of data, definition and implementation of the setup, programming (output of data), and so on. Eventually (and almost guaranteed) something goes wrong …

      I regularly check the top 2 to 5 occurrences manually (setup and outcome) before I make a posting public, especially if probabilties and odds are heavily tilt in one or the other direction (if something sounds too good to be true, it regularly is).

      Best,
      Frank

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