Daily Commentary - Posted on Tuesday, January 24, 2012, 10:41 PM GMT +1

2 Comments


Jan Tuesday 24

Long Streaks of Not Losing

Today marked the 17th consecutive session where the SPY‘s (S&P 500 SPDR) hasn’t lost more than -0.52% on a close to close basis (besides the fact that this is the 2nd lower close only during the last 11 sessions).

Historically, comparable streaks were regularly indicative of higher prices ahead.

Table I below shows the SPY‘s (S&P 500 SPDR) performance (cumulative returns) one, two, and three sessions, 1 week, 1 month later, and by the time the SPY posted its first lower close in excess of -0.55% in the event the SPY hadn’t lost -0.52% on a close to close basis for 17 or more trading days (for the first time in a two weeks time frame, means only the first occurrence during a 10 day time frame has been accounted for).

The SPY closed at an even higher level two days, three days, 1 week and 1 month later (on 17 out of the last 18 occurrences), and at the end of the month as well on 3 (or more) out of every 4 occurrences, and 1.0%+ moves on the upside outnumbered -1.0%+ moves on the downside by a very wide margin.

In addition, the SPY had never lost 1.0% on the then following session (in this event on Wednesday, January 25), and by the time the SPY lost -0.55% ending the then current streak, the index had closed more often on a (significantly) higher level (22x above the trigger day, 15x below the trigger day, and 11 : 3 closes up 1.0%+ vs. down -1.0%+).

 

(click on image to enlarge)


Table I
SPY did not loose -0.52% on the close on 17+ consecutive sessions

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Conclusion(s)

For the time being, shorting the market most probably remains a receipt for disaster (and Wednesday will be an FOMC announcement session, another positive seasonality).

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 (2)

 

  1. GT says:

    SPX 1312.41 @ 1/31 (mo. end), SPX 1314.65 @ 1/24 trigger day, your study in inferring there is underlying strength or possible up-trend continuation into Feb 28, 2012?

  2. GT says:

    SPX 1314.65 @ 1/24 trigger day,
    SPX 1312.41 (1 week later), -2.24 (-0.17%) appx.

    Range [-2.6% – +2.37%] from 1314.65 @ 2/24(1mo. later)

    Range Est.[1280.47 – 1345.81] @ 2/24, Pivot 1314.65

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