Daily Commentary - Posted on Wednesday, December 7, 2011, 11:17 PM GMT +1

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Dec Wednesday 7

Mission Impossible

The SPY (S&P 500 SPDR) gained another +0.37% on the close today, in line with historical probabilities and odds calling for at least one higher close during the remainder of the week ( see Bullish Setups and Seasonalities … ), but it was not a session for the faint of heart.

The SPY has now posted a close above the previous session’s low eight days in a row, at the same time (likewise eight days in a row) never down -0.10%+ on the close. Currently it seems like a mission impossible for the bears to keep the markets at the lows (despite the news), while buyers are still eager to buy every dip, which will probably remaining the prevailing theme for the time being.

I hate to sound like a broken record, but historically the pattern mentioned above and triggered at today’s close had intermediate- and longer-term bullish implications in the past. Table I below shows all occurrences (since 1990) and the SPY‘s performance one, two, three and six months later, and over the remainder of the year in the event the SPY closed above the previous session’s low eight days in a row (for the first time, no consecutive occurrences are accounted for), at the same time never down -0.10% on the close in the past.

The SPY closed at a higher level one, two and six months later on 15 out of 17 occurrences, up 1.0%+ on 13, and down 1.0%+ on 1 (and 2 respectively) occurrences only. There index posted at least one higher close during the then following month on all 17 occurrences, regularly (on 12 occurrences) between one and three sessions later. In addition, the SPY closed out the year with a gain (in comparison to the trigger day’s close) on all but one occurrences (the first one in 1990).


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Conclusion(s)

The trend remains up, and I expect the SPY (S&P 500 SPDR) to post at least one higher close (again) over the course of the next couple of sessions (probably until Monday, December 12, at the latest).

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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