Daily Commentary - Posted on Thursday, January 19, 2012, 10:52 PM GMT +1

3 Comments


Jan Thursday 19

A Strong Prelude …

The S&P 500 is up 4.52% year-to-date on Thursday, January 19, 2012, and provided that major market indices will not fall into a bottomless abyss on tomorrow’s option expiration, the S&P 500 will be up +2.0% year-to-date on close of the final session of the 3rd week in 2012, which had significantly positive implications for the remainder of the year in the past.

Table I below shows the S&P 500 performance (since 1950) one week later, at the end of January (′at month’s end′), and at the end of June (′5 month’s later′) and at the end of the year, followed by the percentage of days (of the remainder of the year) the S&P 500 was trading above and below the trigger day’s close until year’s end, in the event the S&P 500 was up 2.0%+ year-to-date on close of the final session of the 3rd week of a year.

The S&P 500 closed at an even higher level at the respective points in time (1 week, end-of-month, 30th of June and year’s end) in 9 out of 10 years, and closed lower -1.0%+ 1 week, at the end of January and at the end of June only once (but up 1.0%+ in 12 and 18 years respectively), and at year’s end in 2 years only, but up 1.0%+ in 20 out of 22 years.

Most remarkable, on average the S&P 500 had been trading at a higher level 85.07% of the remainder (remaining sessions) of the year (and lower 14.93% respectively), therefore the trend was clearly up, and downside potential limited.

(click on image to enlarge)


Table I
SPX.X up 2.0%+ year-to-date at the end of the 3rd week

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But what happend when the S&P 500 was down year-to-date at the same point in time ?

Table II below shows the S&P 500 performance (since 1950) one week later, at the end of January (′at month’s end′), and at the end of June (′5 month’s later′) and at the end of the year, followed by the percentage of days (of the remainder of the year) the S&P 500 was trading above and below the trigger day’s close until year’s end in the event the S&P 500 was down -1.0%+ year-to-date on close of the final session of the 3rd week of a year.

Performance over the remainder of the year had been mixed at best, actually short-term negative, and more or less like a coin toss looking out at the end of June and at year’s end.

(click on image to enlarge)


Table II
SPX.X down -1.0%+ year-to-date at the end of the 3rd week

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Conclusion(s)

Probabilities and odds are still calling for some downside on tomorrow’s option expiration, but if history provides any guidance, the S&P 500 ll probably remain on firm path over the course of the remainder of th year.

Have a profitable week,

Frank


Disclosure: No position in the securities mentioned in this post at time of writing.
(Short DAX German Aktien Index)

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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)

Comments (3)

 

  1. GT says:

    SPX Fri Jan20 : 1315.38 Trigger date
    1week later; Fri Jan27: 1316.33 + 0.95 (+0.07%)
    Mo. end ; Jan31 : 1312.41 -2.97 (-0.2%)

  2. GT says:

    According to your chart table; SPX 1315.38 (2012 trigger)
    when closed @ mo. end in the negative (from trigger/Options Exp. Fri.)
    Election year(s);
    ’04: June 30 (-0.55%)
    ’52; June 30 (+0.74%)

    0.74% (1315.38) = 9.73 points = 1325.11 SPX HIGH target @ June 30, is this to be inferred?

  3. GT says:

    Your table 2 is missing data. 2000-1990? nothing in between? being down YTD on options Exp Fri. ?
    1996 is Election year, vital info.
    SPX 611.83 Fri. Jan19, 1996,
    615.93 (1995 close)

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