Daily Commentary - Posted on Thursday, December 29, 2011, 9:20 AM GMT +1

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Dec Thursday 29

Singularities between Xmas and New Year

Wednesday’s sessions has been unique in many respects.

It was the first 90%+ down volume day since 1965, Gold posted its biggest one-day loss (-1.75%) since 1969, down more than -2.0% two days after Christmas Day for the first time since 1969, always with respect to the start of my data recording and for the time frame between Christmas and New Year’s Day.

The S&P 500 is now down -1.24% week to date during the period between Christmas and New Year’s Day, which had significantly positive implications in the past.

Table I below shows all occurrences (since 1930; subsequent occurrences are account for) and the S&P 500′ performance (cumulative returns) on the then following three sessions (in this event until January 3, 2012), and until the end of the 2nd week and until the end of January next year in the event the S&P 500 had been down -1.20%+ week to date during the period between Christmas and New Year’s Day in the past. 

The S&P 500 closed at a higher level two and three days later on every 3 out of every 4 (two days later) and 7 out of every 8 (three days later) occurrences respectively (thereof 14 : 1 and 17 : 1 ±1.0% moves on the upside vs. downside), and on 7 out of every 8 occurrences at the end of the 2nd week and at the end of January (next Year) as well. 

 

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Table II below shows all occurrences (since 1969) and Gold‘s (NY, Noon) historical performance over the course of the next couple of days assumed one went long on the session immediately preceding Christmas Day.

Before 2011, Gold had closed at a higher level two days after Christmas Day for the last straight 15 years, and was never down -2.0%+ on that point in time.

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Conclusion(s)

As already presented on my last posting (see High Number of 52-week Highs in December ), a (sizable) down-day on Wednesday and/or Thursday this week might provide a favorable short- and intermediate-term (2-3 week) buying opportunity.

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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