On Wednesday all Asian markets closed at least modestly, partly significantly higher. Japan’s Nikkei 225 closed up +0.43%, Hong Kong’s Hang Seng Index closed up +2.02%, Sydney’s ASX All Ordinaries Index closed up +0.24%, Korea’s KOSPI Index closed up +0.24%, Thailand‘s SET Composite Index closed up +2.03%, Singapore’s Straits Times Index closed up +2.37%, and the Jakarta Composite Index closed up exceptionally strong +4.25%.

Table I shows the ES‘ (S&P 500 E-MINI) intraday performance (since 01/03/2000) concerning the open, high, low, close (compared to the previous’s session close) and close versus open on the same session (in this event Wednesday, June 24) on those trading days where all of those Asian market indices mentioned above managed at least a gain on the close (with Hong Kong’s Hang Seng Index closing higher > +2.00%), assumed one would’ve bought the ES‘ (S&P 500 E-MINI) on close of the previous session (in this event on Tuesday, June 23).

It is especially remarkable that

• chances that the ES (S&P 500 E-MINI) will open higher significantly exceed the respective at-any-time probability and odds, 45 out of 60 occurrences with a higher open and a profit factor (magnitude of change on the open, means sum of all potential profits on a higher open divided by the sum of all losses on a lower open) of 9.66 in comparison to an at-any-time profit factor of 0.97 only;
• the profit factor on the high (means the potential magnitude of change on the intraday high compared to the previous session’s close) and on the low as well significantly exceed the respective at-any-time profit factor on the intraday high (173.44 versus 13.96) and intraday low (0.39 versus 0.07), means downside potential is regularly limited on those sessions which fulfill the setup mentioned above while the upside potential significantly exceeds the respective at-any-time upside potential during any session, and additionally the ES shows an above-average probability for leaving an unfilled opening gap on the upside (on 16 out of 60 occurrences),
  
• although chances that the ES (S&P 500 E-MINI) will close higher are about even (on 33 out of 60 occurrences), the profit factor on the close significantly exceeds the respective at-any-time profit factor on the close (2.74 versus 0.98), means potential profits on a higher close significantly exceed potential losses on a lower close, but
• contrary to the bullish tendencies noted above, chances for a close above the open are below-average only, which even more applies to the respective profit factor as well. Means although the ES (S&P 500 E-MINI) regularly shows some remarkable intraday strength on the open and on the intraday high, a potential (better: probable) higher open is often very close to a potential intraday high.
  

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Bottom line:

Asian market’s positive performance on Wednesday’s morning increases the chances for a higher open and a potential intraday high significantly above Tuesday’s close on Wednesday’s session, but selling into any significant intraday strength during today’s session might provide a favorable short-term/intraday opportunity on the short side with respect to the ES‘ below-average peformance on the close versus open (and additionally taking into account the FOMC announcement at 2:15pm on Wednesday’s session) which would very well comply to the probabilties and odds concerning those setups which were triggered on Tuesday’s close (see my posting Trading the Odds on Wednesday – June 24).

Successful trading,

Frank

P.s.: I’ll regularly make some intraday updates as well using Twitter. If you’re interested in, please have a look at the blog during the trading session as well or subscribe directly to Twitter (recommended).

Disclaimer: No positions in the securities mentioned in this post at time of writing.

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I’ll be on vacation (in Italy)
starting today (Sunday) and going through the end of next week.

While I’m away
frequency and extensiveness of blogging will mainly depend on the local availability of cellular broadband internet access and/or local WLAN (chances are good), but will probably be less frequent and shortened as well.
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From my point of view Friday’s session was just the heyday of an almost perfect week concerning the fact that using the power of statistics in combination with historical market data will give you a decisive edge: the key is to have the odds on your side and bet accordingly, knowing what, when, where and why and how much to bet on each trade (but I regularly leave out the latter question).

The S&P 500 fully complied again to Friday’s bullish forecast based on the positive setup triggered on Thursday’s close when the ‘S&P closed higher at least +1.00% on the day on higher NYSE Total Volume (than the previous session’s volume), but couldn’t manage to take out the previous session’s high‘ (see my post Trading the Odds on Friday – May 29, 2009).

On Friday’s session the S&P 500 closed higher +1.36% on the day, and breadth was (relatively) strong again (but with a negative tendency, I’ll stick to that later in the post) with NYSE Advancing Issues/Declining Issues at 2.86, and NYSE Advancing Volume/Declining Volume at 3.02 (NYSE TRIN at 0.95). The S&P 500 opened higher, posted a higher high, a higher low and a higher close than the previous session’s high/low/close, and finally closed above it’s open. The S&P 500′ low below Thursday’s close early in the session provided the favorable intraday buying opportunity which was spotlighted in Thursday’s bottom line concerning Friday’s session.

On Friday’s close the S&P 500 triggered a few setups which -as always from a historical and statistical perspective- show some (significant) tendencies concerning the S&P 500′ next day’s (Monday’s) probable performance:

• with Friday’s session the S&P 500 closed higher at least +1.30% on two consecutive sessions (Setup S1),
• the ratio of NYSE Advancing Issues/Declining Issues came in higher than on Thursday’s session (2.86 versus 1.92), but the ratio of NYSE Advancing Volume/Declining Volume closed unchanged (and was therefore not able to close higher accordingly, for a logically higher NYSE TRIN) at 3.02 on both sessions (Setup S2), and
  
• the S&P 500 opened higher, posted a higher high, a higher low and a higher close than the previous session’s high/low/close, and finally closed above it’s open (Setup S3).

Table I shows the ES‘ (S&P 500 E-MINI) performance (since 01/02/1990) on the next session (in this event Monday, June 1) immediately following those sessions where setup S1 to S3 listed above had been triggered. Setup S4 represents the combination of setup S1 and setup S2, while setup S5 represents the combination of setup S1 and setup S3.

It is especially notable that the market (E-mini S&P 500) shows a significant tendency of a lower close the then following session, concerning both the probability for a lower close the next session with approximately 2:1 (67%) and profit factor (expectancy and pay-off) as well (potential losses -better ‘the sum of’- on the downside almost double potential gains on the upside). And even if we’d completely ignore the fact that the S&P 500 closed higher at least +1.30% on two consecutive sessions and take into account the combination of setup S2 (negative relatively tendency in breadth stats) and S3 (5 highs) only, the probability for a higher close would be below-average (18 out of 38 occurrences), and the profit factor would be unchanged at 0.55 only (for the same conclusions concerning the negative tendency on the next session).

Table II now shows the ES‘ (S&P 500 E-MINI) intraday performance (since 01/02/1990) concerning the open, high, low, close (compared to the previous’s session close) and close versus open on the next session (in this event Monday, June 1) immediately following those 30 sessions where ‘the S&P 500 closed higher at least +1.30% on two consecutive sessions‘ and ‘the S&P 500 opened higher, posted a higher high, a higher low and a higher close than the previous session’s high/low/close, and finally closed above it’s open‘ on the most recent session (setups S1 and S3).

It is especially notable that

1. the market (S&P 500 E-MINI) regularly shows a notable tendency of a lower open the then following session (on 25 out of 30 occurrences),
   
2. the market (S&P 500 E-MINI) regularly shows a notable tendency of again some follow-through of the trigger day’s strength during the next session due to the fact that the respectiv profit factor on the ‘high’ almost doubles the respective at-any-time profit factor  (for statistical purposes only in order to demonstrate that the magnitude of change on the high almost doubles the respective at-any-time magnitude of change), but
   
3. chances are very high that the market will post an intraday low significantly below Friday’s close as well (the average losing trade on the low is greater than the respective winning trade on the high), and
4. chances are high as well that the market will finally close lower on the day, with 33.33% for a higher close the next session significantly lower than the respective at-any-time probability for a higher close the next session, and with a profit factor of 0.52 one would’ve lost$2 for every $1 won. But regularly donwside potential is limited as well with only two 5 sessions out of 30 occurrences with a close -1.0% or more below the previous session’s close, and the average losing trade on the close (slightly) below the respective average at-any-time losing trade.
   

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Bottom line:

1. History (even the most recent since 2009) suggests that that market is currently a bit (short-term only) extended on the upside. The most probable scenario for Monday’s session might be a (slightly) lower open, a  positive reversal and run-up  to Monday’s  intraday high (on average 0.82% above Friday’s close) in the first half of the session, followed by another round of profit-taking in the second half of the session (posting a low significantly below Friday’s close) with finally a lower close (above the low) on the day (but it’s difficult enough to make a forecast concerning the next session’s close, leave alone trying to forecast the next session’s intraday movements and their potential chronological order).

Successful trading,

Frank

P.s.: WordPress recently implemented a Twitter widget, so I’ll regularly make some intraday updates as well using Twitter. If you’re interested in, please have a look at the blog during the trading session as well or subscribe directly to Twitter (recommended).

Disclaimer: No positions in the securities mentioned in this post at time of writing.

The S&P 500 fully complied to today’s bearish forecast based on the negative setup triggered on Tuesday’s session when the ratio of NYSE Advancing Issues/Declining Issues closed above 4.5 and NYSE Advancing Volume/Declining Volume closed above 5.5 on the same day (see my post Trading the Odds on Wednesday – May 27, 2009).

The S&P 500 closed lower -1.90% on the day, and what looked like a positive divergence between a relatively strong breath and a relatively weak index approximately 90 minutes before the close (NYSE TRIN in bullish territority < 1.0 when the S&P 500 was already dwon more than -1.0%, see my Twitter update) finally turned into a session with breath significantly lopsided on the downside. NYSE Advancing Issues/Declining Issues closed at 0.44, and NYSE Advancing Volume/Declining Volume at 0.24 (NYSE TRIN at 1.81).

But although the S&P 500 closed significantly lower on a very week breadth, especially remarkable was the fact that the S&P 500 nevertheless posted a higher high than Tuesday’s high and a higher low than Tuesday’s low which triggered a short-term buy signal on Wednesday’s close.

At first Table I below shows the ES‘ (S&P 500 E-MINI) performance (since 01/02/1990) concerning setups S1 to S5 -side by side- on the next sessions assumed one would have bought the ES on close of the respective session where setups S1 to S5 had been triggered. Setups S1 to S5 are defined as

Table I

• Setup S1: the S&P 500 closed lower at least -1.90% on the day
• Setup S2:  the S&P 500 posted a higher high and higher low than the previous session’s high/low
• Setup S3: NYSE TRIN closed above 1.80
• Setup S4: Setups S1 und S2 combined
• Setup S5:  Setups S1 und S3 combined

It is especially notable that on the session immediately following those sessions where the S&P 500 had either closed lower at least -1.90%, or the NYSE TRIN closed at 1.80 or higher, or especially where the S&P 500 not only closed lower at least -1.90% but posted a higher high and higher low as well, probabilities for a higher close and odds (expectany / pay-off) are significantly tilt in favor of the bullish side (a short-term snap-back).

Table II below now shows the ES‘ (S&P 500 E-MINI) intraday performance (since 01/02/1990) concerning the open, high, low, close (compared to the previous’s session close) and close versus open on the next session (in this event Thursday, May 28) immediately following those sessions where the S&P 500 not only closed lower at least -1.90% but posted a higher high and higher low as well.

It is especially notable that -although the sample size is way too small to read any statistically relevent into it- the market shows a tendency for a weak open (3 sessions with a higher open, 5 with a lower open, but the average lower open is down -0.95% compared to an at-any-time lower open of -0.38% only), but a remarkable tendency for some intraday strength as well with an average intraday high +1.87% above the previous session’s close, and finally with 7 higher and only 1 lower close.

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Bottom line:

1. Today’s magnitude of change on the downside (-1.90%), the weak breadth (NYSE TRIN at 1.80) and the higher high and higher low on today’s session triggered a short-term buy signal on the close, and any weakness on Thursday’s open will probably provide a favorable short-term (intraday) buying opportunity.

Successful trading,

Frank

P.s.: WordPress recently implemented a Twitter widget, so I’ll regularly make some intraday updates as well using Twitter. If you’re interested in, please have a look at the blog during the trading session as well or subscribe directly to Twitter (recommended).

Disclaimer: Long BGU (Daily Large Cap Bull 3x Shares ) at time of writing.

Monday next week will be Memorial Day, and additionally we’re entering into the favorable (with a bullish bias) end-of-month period for stocks -at least as an adage says-.  As always I decided to take the quantitative approach concerning this (potential) end-of-month phenomena in oder to check if there is any historical and statistical evidence which supports the thesis, and to check it the sessions following Memorial Day and (almost, except Good Friday) all other exchange holidays as well show any potential peculiarities possibly providing a tradable edge.

I checked for those occurrences since 01/02/1990 where the following setups were triggered, assumed one would have bought the ES (E-mini S&P 500 Futures) on close of the session immediately preceding the respective exchange holiday for a holding period of 5 days (1 week). Therefore concerning Memorial Day one would have bought the ES on close of Friday immediately preceding Memorial Day (in this event Friday, May 22, 2009), and closed the trade on close of Monday one week after Memorial Day .

The US exchange holidays are celebrated …

• New Year’s Day - January 1
• Martin Luther King, Jr. Day – observed on the third Monday of January
• Presidents Day - observed on the third Monday of February
• Memorial Day - observed on the last Monday of May
• Independence Day - July 4
• Labor Day - observed on the first Monday in September
• Thanksgiving Day - observed on the fourth Thursday of November
• Christmas Day - December 25

____Left Out____

Good Friday

____No Exchange Holidays____

Columbus Day - observed on the second Monday in October

Veterans Day - November 11

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At first Table I below shows the E-MINI S&P 500 (ES)‘ performance (since 01/02/1990) concerning setups S1 to S5 -side by side- over the course of the then following 5 sessions assumed one would have bought the ES (S&P 500 futures) on close of the session immediately preceding the respective exchange holiday (E-mini S&P 500 Future’s day session). Setups S1 to S5 are defined as

Table I

• Setup S1: New Year’s Day - January 1
• Setup S2: Martin Luther King, Jr. Day – observed on the third Monday of January
• Setup S3: Presidents Day - observed on the third Monday of February
• Setup S4: Memorial Day - observed on the last Monday of May
• Setup S5: Independence Day - July 4

Table II

• Setup S1: Labor Day - observed on the first Monday in September
• Setup S2: Thanksgiving Day - observed on the fourth Thursday of November
• Setup S3: Christmas Day - December 25
• Setup S4: buy on close 3 sessions before the last session of the month, sell on close of the 2nd session of the new month

With a win/loss ratio of 11:8 and a profit factor of 2.71 compared to an at-any-time profit factor of 1.15 for the ES, the week after Memorial Day not only shows the highest probability for a higher close 5 sessions later, but the highest profitability (pay-off) off all 8 exchange holidays listed above as well. Additionally the end-of-month period shows as well a win/loss ratio and profit factor (1.63) well above the respective at-any-time probability for a higher close 5 session later and profit factor (1.13).

But due to the VIX’ (S&P 500 Volatility Index) peculiar behavior on Friday’s session – the VIX posted an intraday low of -2.49% below Thursday’s close, but completely reversed course and close up +4.10% on the day although the SPX closed almost unchanged -, I had a hunch that it would be worth some time and effort in order to check if the VIX would -as it regularly does- mirror (but negatively correlated) the ES mini’s bullish bias during Memorial Day week and would show a bearish bias respectively. But now comes the surprise …

At first Table III below shows the VIX‘ performance (since 01/02/1990) over the course of the then following 5 sessions assumed one would have ‘bought’ (hypothetically and for statistical purposes only, the VIX itself is no tradable asset) the VIX on close of the session immediately preceding Memorial Day (regularly the Friday before). The ‘Trigger’ column shows the VIX’ value on close of the session immediately preceding Memorial Day (like last Friday). ‘next session’ is the session immediately following Memorial Day and so on.

It is especially remarkable -to say the least- that the VIX closed up the sesion immediately following Memorial Day on 18 (!) out of the last 19 years, for an extraordinary hypothetical profit factor of 37.93 compared to an at-any-time profit factor for the VIX of 1.09 only, especially due to the extraordinary winn/loss ration of 18:1 and the fact that the VIX closed higher the next session +4.00% or (significantly) more on 13 out of the last 19 years (and +8% or more on 9 occurrences). Additionally the VIX was trading above the close of the session immediately preceding Memorial Day one week after Memorial Day with a probability and hypothetical ‘profit factor’ (magnitude of change on the upside compared to the downside) significantly above the respective at-any-time probability for a higher VIX close 5 sessions later and ‘profit factor’ as well.

Table IV below now shows the VIX‘ intraday performance (since 01/29/1993) concerning the open, high, low, close (compared to the previous’s session close) and close versus open on the next session (in this event Tuesday, May 26) immediately following Memorial Day.

If history is any indication concerning the VIX’ performance on Tuesday, May 26, the VIX may be looking forward to -from a historical and statistical point of view- one of it’s probably most bullish sessions (means up-trending VIX, not the major market indexes) of the year, if not THE session (will be suibject to a follow-up) with the highest probability for a higher open/high/low/close and magnitude of change (on the upside) as well. During the last 8 years, the least higher open on the session immediately following Memorial Day was +4.44%; since 01/02/1990 the VIX always posted a high above the previous session’s close, and in only 4 out of 19 years did the VIX post an intraday low below the previous session’s close at all while the VIX left an unfilled gap on the upside in the other 15 years .

P.s.: Due to the significance of the findings I thought of a data or programming issue and manually (double-)checked (and verified) at least the last 9 occurrences (since 2000).

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Bottom line:

1. From a historical and statistical point of view, the week after Memorial Day regularly shows a positive bias concerning the probability for a higher close 5 days later and the respective profit factor as well.
2. But -again from a historical and statistical point of view- the ‘asset’ with the most bullish bias (on the upside) during Memorial Day’s week may probably be the VIX. Regularly there is an inverse relationship (negative correlation) between the S&P 500 and the VIX, and a signifcant bullish bias concerning the VIX would spell more than trouble concerning the SPX’ performance over the course of the then following 5 sessions, but Memorial Day’ week seems to be a period in the market where this (negative) correlation is completely decoupled.

Successful trading,

Frank

Disclaimer: (Net) Long VIX futures at time of writing.

P.s.: WordPress recently implemented a Twitter widget, so I’ll regularly make some intraday updates as well using Twitter. If you’re interested in, please have a look at the blog during the trading session as well or subscribe directly to Twitter (recommended).