Daily Commentary - Posted on Friday, December 2, 2011, 7:18 PM GMT +1

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Dec Friday 2

Up Month-to-Date on Nonfarm Payroll Day

At time of writing (1:45 PM ET), the S&P 500 is on the verge of closing higher +0.60% on the day (assumed everything unchanged), up approximately +0.50% month-to-date on today’s nonfarm payroll release day.

When the S&P 500 closes up 0.50%+ month-to-date on December’s release date of nonfarm payroll figures (regularly the first Friday), upsode potential over the course of the then following week will probably be limited, and there is a significant tendency for lower prices ahead (the better the month-to-date returns on December’s nonfarm payroll day, the worse the short-term outlook).

Table I below shows all occurrences and the S&P 500 performance over the course of the then following week in the event the S&P 500 had been up 0.50%+ on close of December’s release date of nonfarm payroll figures in the past. The index closed at a lower level two to five sessions later on almost two out of every three occurrences (or 66.67% of the time), and had never been up 1.0%+ two days later (in this event on Tuesday, December 6).


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Table II below shows all occurrences and the S&P 500 performance over the course of the then following week in the event the S&P 500 had been up 0.75%+ (instead of 0.50%+) on close of December’s release date of nonfarm payroll figures in the past. The index closed at a lower level two sessions later on three out of every four occurrences (or 75% of the time), and three to five sessions later still on two out of every three occurrences (or 66.67% of the time), and had never been up 1.0%+ one, two and four days later (but down 1.0%+ on six or more occurrences).

And last but not least: Table III below shows all occurrences and the S&P 500 performance over the course of the then following week in the event the S&P 500 had been up 1.00%+ (instead of 0.75%+) on close of December’s release date of nonfarm payroll figures in the past. The index closed at a lower level two sessions later on four out of every five occurrences (or 80% of the time), and three to five sessions later still on two out of every three occurrences (or 66.67% of the time), and had never been up 1.0%+ one to four days later.

Conclusion(s): Depending on today’s outcome and the magnitude of change on the close, probabilities and odds might be tilt in favor of some short-term consolidation of the market’s recent gains and lower prices ahead, especially during the Tuesday to Thursday time frame next week, while the index might be trading in a tight range at or around unchanged levels on Monday (historically the median and mean change were close to zero, and there had been only two out of 29 occurrences with an outside +/-1.0% move in the past).

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.

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(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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