Daily Commentary - Posted on Saturday, February 4, 2012, 6:39 PM GMT +1

3 Comments


Feb Saturday 4

As (the first week of) February goes …

Major market indices closed at another multi-month high on February 3, 2012, and the endless number of bullish setups being triggered during the last couple of weeks proofed to be right (at least up to now).

The S&P 500 closed out the first week in February with a +2.17% (weekly) gain, closed at its highest level since July 22, 2011, at the same time up +6.94% year-to-date, and up +5.31% over the trailing month.

Although a couple of setups triggered on close of Friday’s session are indicating that upside potential may be limited over the course of the next two to three of days (e.g. 6-month high on Nonfarm Payroll release day w/ gap up, the S&P 500 and the SPY‘s (S&P 500 SPDR) closed more than 2 standard deviations above their upper Bollinger Bands, …), historical precedences are suggesting that any potential short-term weakness may be short-lived.

Table I below shows the S&P 500′ performance (cumulative returns) 1 week later, at the end of May (’3 month(s) later (EoM)’), at the end of September (7 month(s) later (EoM)) and at the end of the year (at year’s end) in the event

  • the S&P 500 was up ≥ 5.00% year-to-date (triggered on 02/01/2012), or
  • the S&P 500 was up ≥ 5.00% over the trailing month and closed at a 6-month high (triggered on 02/03/2012)

at any time during the first week in February.

Results are quite impressive. The S&P 500 closed at an even higher level

  • 1 week later in 3 out of every 4 occurrences (years),
  • at the end of May in 16 out of 19 years,
  • at the end of September in all 19 years, and
  • at the end of the year in 18 out of 19 years.

In addition, between the trigger day and the final session of the respective year, the S&P 500 closed above the trigger day’s close on (almost) 9 out of every 10 sessions (or on average 88.33% of the time).

(click on image to enlarge)


Table I
S&P 500 rallies right at the start of the year

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Conclusion(s)

It appears quite likely that – taking into account these minor adjustments to the so-called January Barometer (“As January goes, so goes the (rest of the) year”) – the S&P 500 will continue moving higher over the remainder of the year.

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 (3)

 

  1. kimo says:

    Frank,

    I absolutely love your site…a breath of fresh air; however, I think stats are running wild here. If you lessen the parameters a bit, last year would qualify…and we know what happened. At the end of the day, stats simply can’t be taken in a vacuum anymore given how involved the government has been in asset purchasing. It changes the entire landscape.

    I think stat analysis works much better over the short-term than the long-term. In fact, given the changing landscape, long-term analysis makes little sense.

    • TradingTheOdds says:

      kimo,

      thanks a lot for your kind word, but I disagree with your opinion that ‘due to the changing landscape,long-term analysis makes little sense’.

      The landscape is continuously changing, from the bull market during the 90th, the tech bubble a decade ago, financial crisis (2007 – 2009, 2011 …), terror attacks (9/11), the war in iraq and afghanistan (among others). But greed and feer as the driving forces behind the markets will (probably) never change. And the markets had closed at a higher level in all 19 years despite the fact that one or more (assumed) disaster (for the markets) had happened in all those years.

      Best,
      Frank

  2. GT says:

    Trigger date : Feb 1 : SPX 1324.09
    Feb 3 : 1344.90, + 20.81 or 1.57%,
    Feb 8 (next Wed)? so far in middle of 7 day period + 1.57%,

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