Daily Commentary - Posted on Friday, January 27, 2012, 9:44 AM GMT +1

7 Comments


Jan Friday 27

Highs | Lows and Fed Days

Major market indices closed at multi-month highs on January 25, 2012 (FOMC announcement session), followed by a (small) pullback on the then following (yesterday’s) session.

Looking at historical precedences when the SPY‘s (S&P 500 SPDR) had closed either at a 30-day high or low on an FOMC announcement session, followed by a lower close immediately thereafter, this had significantly positive implications over the course of the next couple of weeks.

Table I below shows the SPY‘s (S&P 500 SPDR) performance (cumulative returns) 1 day and 4 days later, at the end of the then following week (in this event on Friday, February 3), 2 weeks later (end-of-week), and at the end of the respective month in the event the SPY had closed either at a 30-day high or low on an FOMC announcement session, followed by a lower close immediately thereafter in the past.

Although returns the next day (in this event on Friday, January 27) had been mixed (notably a 1:6 ratio in favor of -1.0%+ moves on the downside), the SPY had closed at a higher level 4 days later, at the end of the then following week and 2 weeks later (end-of-week) on 17 | 18 | 19 out of 20 occurrences (with 1.0%+ moves on the upsides outnumbering -1.0%+ moves on the downside by an extraordinary wide margin), and had never closed lower -1.0%+ at the end of the month, but higher +1.0% on 16 out of 20 occurrences.

(click on image to enlarge)


Table I
SPY at 30-day high or low on FOMC announcement session. down thereafter

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Conclusion(s)

For the time being, the trend most probably remains up, and lower prices (intraday or end-of-day) on Friday, January 27 might provide a favorable intermediate-term 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)

Comments (7)

 

  1. […] statistically things look quite bullish going on analysis from Trading The Odds which can be found here.Another chart that looks ugly is USD:CAD, but I was amazed to see my system gave a buy signal right […]

  2. GT says:

    Trigger day is Jan25, not Jan26, majority of FOMC dates earlier in the month, may skew data for end of month

    • TradingTheOdds says:

      GT,

      thanks for your hint.

      Trigger day is NOT the FOMC announcement session (Jan 25), but the day thereafter (in the event of a lower close, see posting). Therefore Jan 26 as the most recent trigger day is correct.

      Even with the majority of FOMC dates earlier in the month, data for end-of-month is compliant with probabilities and odds for a higher close 1 month later (not shown), and the respective t-score speaks for itself.

      Best,
      Frank

  3. GT says:

    SPX 1318.43 @ 1/26, 1312.41 @ 1/31, -6.02 points @ mo end, – 0.46%, within range(s) of your study, SPX was as low as 1300 on Mon., but it came true, no worse than -0.62%,

  4. GT says:

    SPX Trigger date Jan26; 1318.43
    4 trading days later (Feb 1) 1324.09
    + 5.66 points (+ 0.43 %)
    closed at higher level as per your study, back from 1300.49 low @ Jan30 (2 tradings after trigger date)

  5. GT says:

    4 trading days later +0.43%,, According to your data studies ; once up 4trading days later, SPX closes higher 1 week later and 2 weeks later (End of week); Fri.Feb 3 and Fri. Feb10 should not close below trigger date SPX 1318.43

  6. GT says:

    Mar 14, day post FOMC , SPX 1394.28 – 1.67,
    Mar20, 4 tradingday later ; SPX 1405.52, +11.24 +0.8%,
    Mar23: 1wks later(EOW) 1397.11, +2.83 (+0.2%),

    SPX 1412.52 Mar27 with 3 trading sessions left, for 2weeks EOW, and EOM,
    2 weeks later (end-of-week) on 17 | 18 | 19 out of 20 occurrences (with 1.0%+ moves on the upsides outnumbering -1.0%+ moves on the downside by an extraordinary wide margin), and had never closed lower -1.0%+ at the end of the month, but higher +1.0% on 16 out of 20 occurrences.

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