With respect to the latter, the last occurrence dates back 15 years (see stats below), which – at least with respect to historical probabilities and odds – might have positive implications looking out 10 sessions ahead.

Table I below shows the SPY‘s historical performance (since 01/01/1990) over the course of the then following 1, 2, 4, 5 and 10 sessions assumed one would’ve bought the SPY on the close of a session when the RSI(2) closed above 99 on the fourth consecutive session.

Interesting to note that historical probabilities favor a continuation of the uptrend over the course of the then following 10 sessions. After four consecutive RSI(2) readings above 99 (on the close), the SPY closed higher 5 sessions later on 12 out of 14 occurrences, and was never trading (intraday, not only on the close) lower than -1.46% below the trigger day’s close over the course of the then following 5 sessions, so historically downside potential was more or less not existent. In addition, the SPY was trading higher 10 sessions later on 11 out of those 14 occurrences, and did never close lower greater than -0.29% below the trigger day’s close.

And on a session immediately following a fourth reading above 99 (in this event on Thursday, March 11), the SPY never lost more than -0.33% on the close, although one should be carefull to read anything statistically relevant into something with 14 occurrences only over the course of 20 years .

But with Distribution of Returns (represents where the setup’s median return is ranked in comparison to the – ranked in descending order – median at-any-time return) only slightly above/below the 50% mark, none of those occurrences being part of the top 10% best and worst performing at-any-time sessions, and the SPY closing higher greater than +1.0% five sessions later on only one out of those 14 occurrences, upside potential will probably be limited as well, so a sideways trading, rangebound marked with an upside bias seems tto be he most likely outcome.

Almost the same conclusion can be drawn with respect to historical occurrences where the RSI(2) closed above 95 on six consecutive sessions. Table II below shows the SPY‘s historical performance (since 01/01/1990) over the course of the then following 1, 2, 4, 5 and 10 sessions assumed one would’ve bought the SPY on the close of a session where the RSI(2) closed above 95 on the sixth consecutive session.

Historically on a session immediately following a sixth reading above 95 (in this event on Thursday, March 11), the SPY never lost more than -0.47% on the close (24 occurrences), and did never close lower than -0.43% below the trigger day’s close 4 sessions later. And out of those 24 occurrences, the SPY has always posted at least one higher high than the trigger day’s intraday high over the course of the then following 10 sessions.

Successful trading,
Frank

________________________________

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

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.

But Wilder’s RSI is not the only available momentum oscillator measuring the velocity and magnitude of directional price movements (in order to check for the likelihood of a short-term / next session’s mean-reversion tendency of the markets).

Others (list not exhaustive) are

• the Commodity Channel Index (CCI)
  (developed by Donald Lambert)
• Williams %R (%R)
  (developed by Larry Williams)
• the Ultimate Oscillator (UltOsc)
  (developed by Larry Williams)
• the DV Super Smoothed Double Stochastic Oscillator (DVSSDSO)
  (developed by David Varadi at http://www.dvindicators.com/)

Due to the fact that the original DV Super Smoothed Double Stochastic Oscillator utilizes a 10-day time frame, I applied some small adaptations to the original concept, especially with respect to the time frame, the time frame of the first smoothing period and the smoothing factor as well. So stats below and the respective bottom line may or may not apply to his original concept (additionally taking into account that my implementation in Matlab is not guaranteed to be error-free), but should be regarded more or less as a (very successful) proof of concept, even applied to a short-term time frame.

For evaluation purposes in order to quantify the short-term state of the market and check for the market’s (utilizing the SPY as a proxy for the S&P 500) historical probabilities and odds for a short-term mean-reversion tendency on the then following session, the following set of parameters (time frames) were used:

• (Setup 1) RSI(2) : the 2-day Relative Strength Index
• (Setup 2) CCI(4) the 4-day Commodity Channel Index
• (Setup 3) %R(2) : the 2-day Williams %R
• (Setup 4) UltOsc(1, 2, 4) : 1-day, 2-day and 4-day Ultimate Oscillator
• (Setup 5) DVSSDSO(3, 2, 0.55) : 3-day time frame, 2-day time frame (for the computation of the average for the first smoothing), and a smoothing factor of 0.55 for the DV Super Smoothed Double Stochastic Oscillator

For the time frame from 01/01/1990 to 02/12/2010, all indicator values were ranked from highest to lowest (day-by-day, always between the 01/01/1990 and the then current session to avoid the ‘hindsight bias‘), then utilizing the respective (then current) lowest 5th (covering approximately 253 sessions) and 10th percentile (covering approximately 507 sessions) for going long on the close, and highest 90th and 95th percentile for going short on the close checking for the market’s historical probabilities and odds for a higher / lower close on the then following session (the short-term mean-reversion tendency).

Assessment criteria will be the Growth Rate per Trade (geometric growth of cumulative returns, not annualized, but on a per-trade basis, the efficiency), the Percentage of Winning Trades (the effectiveness), the Maximum Drawdown, the percentage-wise number of Top 10% Winners and  Top 10% Losers (means the percentage of occurrences among the top 10% of the best / worst performing at-any-time sessions), and the t-score (Student’s t-test) in order to check if – and to what extent – any deviation from at-any-time returns occurred by pure chance only.

Using Stockcharts.com (chart courtesy Stockcharts.com) for a graphic representation of those indicators listed above, the run of the respective curves (below the chart) looks quite similar, but as the stats will show, the devil is in the details, and they’re ‘performing‘ (means their respective accuracy of forecast) quite differently.

Table I below shows the SPY‘ historical performance (since 01/01/1990) on the then following session assumed one would’ve bought the SPY on the close of a session where the respective indicator closed in the bottom 10th percentile of the then current range of indicator values.

For going long on the close on a session where the respective indicator closed in the lowest 10th percentile of the then current range of indicator values, both the Relative Strength Index and the Ultimate Oscillator show the best performance stats with respect to the assessment criteria defined (Growth rate per Trade,  Percentage of Winning Trades, Top 10% Winners and Losers, and respective t-scores), while the DV Super Smoothed Double Stochastic Oscillator out-performs with respect to the lowest Maximum Drawdown. But they all do a good job, with a t-score always exceeding the +2.40 mark, means there is a (very) low probability that any of these positive results occurred by chance only.

Table II below shows the SPY‘ historical performance (since 01/01/1990) on the then following session assumed one would’ve sold short the SPY on the close of a session where the respective indicator closed in the top 10th percentile of the then current range of indicator values.

With respect to gauging ‘overbought‘ market conditions providing a potential favorable edge on the short side of the market, differences in quality of forecasts between all participating momentum oscillators become quite obvious. Only Williams %R and again the Ultimate Oscillator are able to achieve (noteworthy) positive results on the short side of the market, showing compelling performance stats (and t-scores) concerning all of those assessment criteria defined, while the Commodity Channel Index (4-day time frame) completely fails with respect to timing a profitably entry on the short side.

Table III below now shows the SPY‘ historical performance (since 01/01/1990) on the then following session assumed one would’ve bought the SPY on the close of a session where the respective indicator closed in the bottom 10th percentile of the then current range of indicator values, and sold short the SPY on the close of a session where the respective indicator closed in the top 10th percentile of the then current range of indicator values (combined long/short strategy).

With respect to the 10th percentile and a combined long/short strategy, Williams %R and the Ultimate Oscillator show far superior performance stats with respect to all assessment criteria defined among all of those participating momentum oscillators, and a t-score close to or even exceeding the +5 mark is an indication that the probability that the out-performance in comparison to at-any-time probabilities and odds occurred by chance only is close to zero.

For the next run I will lower the respective percentiles from 10th to 5th, looking for the more extreme ends of the distribution of indicator values.

Table IV below shows the SPY‘ historical performance (since 01/01/1990) on the then following session assumed one would’ve bought the SPY on the close of a session where the respective indicator closed in the bottom 5th percentile of the then current range of indicator values.

Now the clear winner is the DV Super Smoothed Double Stochastic Oscillator. It shows the highest Growth Rate per Trade, the lowest Maximum Drawdown, with 4.72% by far the lowest percentage of occurrences within the top 10% worst performing at-any-time sessions, the lowest maximum losing trade and by far the highest t-score of all participating momentum oscillators.

Table V below now shows the SPY‘ historical performance (since 01/01/1990) on the then following session assumed one would’ve sold short the SPY on the close of a session where the respective indicator closed in the top 5th percentile of the then current range of indicator values.

The same picture again: With respect to the 5th percentile, Williams %R and the Ultimate Oscillator show far superior performance stats with respect to all assessment criteria defined among all of those participating momentum oscillators successfully and profitably timing an entry on the short side of the market, while the Relative Strength Index (RSI) and the DV Super Smoothed Double Stochastic Oscillator show negative (!) results concerning all relevant performance stats even on the top 5th percentile.

Table VI below shows the SPY‘ historical performance (since 01/01/1990) on the then following session assumed one would’ve bought the SPY on the close of a session where the respective indicator closed in the bottom 5th percentile of the then current range of indicator values, and sold short the SPY on the close of a session where the respective indicator closed in the top 5th percentile of the then current range of indicator values (combined long/short strategy).

With respect to the 5th percentile and a combined long/short strategy, Williams %R, the Ultimate Oscillator and the DV Super Smoothed Double Stochastic Oscillator are very close, with (again) the Ultimate Oscillator leading the pack.

Bottom line: The Ultimate Oscillator may have owned the title of the best-performing all-rounder among those evaluated momentum oscillators listed above, showing superior results on the long and short side of the market likewise with a high accuracy of forecasting a short-term mean reversion tendency of the underlying index on both sides of the market, while David Varadi’s DV Super Smoothed Double Stochastic Oscillator (with deviating time frames and smoothing factor) shows by far the highest quality of forecast (and performance stats) with respect to those market conditions regularly marked as ‘heavily oversold‘, profitably timing a short-term bottom.

At least with respect to the 10th and 5th percentiles, the Commodity Channel Index (CCI) (may be due to the fact that a 2- or 3-day time frame is not really applicable) almost always significantly under-performed in any of those percentiles (and with respect to the assessment criteria defined) in comparison to the Relative Strength Index (RSI), the Ultimate Oscillator, the Williams %R and David Varadi’s DV Super Smoothed Double Stochastic Oscillator.

Surprisingly the popular Relative Strength Index (RSI) was only able to keep up with the Ultimate Oscillator with respect to going long on the bottom 10th percentile, but significantly under-performed (to say the least) both the Williams %R and the Ultimate Oscillator on the short side of the market when the respective indicator closed in the top 5th and 10th percentile of the then current range of indicator values, vainly trying to gauge a short-term market top. Relatively high 2-day Relative Strength Index (RSI) values are – at maximum – indicative of limited upside potential on the then following session, being highly indicative of a continuation of the then current uptrend after a short (and regularly mild) pullback (see my posting ‘Overbought’ w/strong Uptrend), but not very helpful (to say the least) for timing the markets on the short side.

Successful trading,
Frank

________________________________

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xx

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

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.

Another interesting calendar (exchange holiday) effect will be triggered on today’s (Thursday’s) close.

Table I below shows the SPY‘ historical performance (since 01/01/1990) over the course of the then following five sessions assumed one would’ve bought the SPY on the close two sessions (like today) before the US markets will be closed due to the President’s Day holiday (next Monday).

Interesting to note that the SPY closed lower on the then following session (the session immediately preceding the President’s Day holiday) on 17 out of the last 20 occurrences, and posted at least one lower close than the trigger day’s close (Thursday’s close) over the course of the then following five sessions on 18 out of those 20 occurrences for a probability of 90.00%, significantly above the at-any-time probability of 71.12% for at least one lower close over the course of the then following five sessions (those two occurrences where the SPY never looked back over the course of the next five sessions are marked with an asterisk).

In addition, the setup related probability (60.00%) for posting at least one higher high over the course of the then following five sessions significantly undercuts the respective at-any-time probability of 78.29%, while the setup related probability (80.00%) for posting at least one lower low over the course of the then following five sessions significantly exceeds the respective at-any-time probability of 70.13%

Especially with respect to those sessions immediately preceding and following the President’s Day, with a Profit Factor never exceeding 0.30, Distribution of Returns barely exceeding the 40.00% mark (the median trade shows a significantly lower rate of return / negative magnitude of change than the median trade (=50%) within the at-any-time distribution of daily returns, and Top 10% Winners and  Top 10% Losers significantly below /above the appropriate percentage of 10% (means a lot more than approprite are among the top 10% of the worst performing at-any-time sessions, and a lot less than approprite are among the top 10% of the best performing at-any-time sessions since 1990), odds are lopsided in favor of a negative outcome – or at least pointing to limited upside potential – in the Friday to next Wednesday’s time frame.

But the problem with those calendar effects is to find a reasonable, market related justification why probabilities and odds are sometimes skewed in one or the other direction.

Successful trading,
Frank

________________________________

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xx

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

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.

But although such ‘recovery days‘ (posting an intraday low significantly below the previous session’s close early during the session, recouping all of those intraday losses and some into the end of the session) are regularly considered as an intermediate-term bottom and a buying opportunity, history tells otherwise.

Table I below shows the SPY‘ historical performance (since 01/01/1990) over the course of the then following five sessions after the SPY had posted an intraday low at least -1.75% below the previous sessions close (Friday’s low was -1.7475%), but closed positive on the day. 

(SPY data is adjusted for dividend and cash payments)

Interesting to note that the SPY closed lower on the then following session on 27 out of 42 occurrences since 1990 (on every 2 out of 3 occurrences), and posted at least one lower close than the trigger day’s close (Friday’s close) over the course of the then following five sessions on 38 out of those 42 occurrences for a probability of 90.48%, significantly above the at-any-time probability of 71.44% for at least one lower close over the course of the then following five sessions (those four occurrences where the SPY never looked back over the course of the next five sessions are marked with an asterisk).

In addition, especially those ‘recovery days‘ were – from a historical perspective – sessions which were – with an significantly above-average probability – followed by some of the worst performing sessions and clusters of sessions (over the course of the then following couple of days). With a historical next session’s Profit Factor of 0.38, a Distribution of Returns at 18.88% (the median trade shows a significantly lower rate of return / negative magnitude of change than the median trade (=50%) within the at-any-time distribution of daily returns; or the other way around: the setup’s median trade -  with -0.76% – is located in the lowest quartile of the at-any-time daily returns), and Top 10% Losers at 38.10% (means 38.10% of those 42 occurrences = 16 sessions are among the top 10% of the worst performing at-any-time sessions since 1990, significantly above the appropriate percentage of 10%), odds are lopsided in favor of a negative outcome on the then following (in this event Monday’s) session.

And even over the course of the then following five sessions, with a Distribution of Returns barely exceeding the 40.00% mark (the median trade shows a significantly lower rate of return / negative magnitude of change than the median trade (=50%) within the at-any-time distribution of returns), – at least with respect to this admittedly very specific setup – historical probabilites and odds do not support the thesis that the bottom is in (we might get a better opportunity during the next week).

Those ‘recovery days‘ frequently appeared during the bear markets in 2002 and 2008 / early 2009.

But as always: Everything is possible (but not probable) …

Successful trading,
Frank

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

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.

With Tuesday’s session the SPY now closed at least 2 standard deviations below it’s 20-day SMA (the well-known Bollinger Bands) on three consecutive sessions.

Table I below shows the SPY‘ historical performance (since 01/01/1990) over the course of the then following five sessions after the SPY had closed at least 2 standard deviations below it’s 20-day SMA on three (or more) consecutive sessions in the past.

Interesting to note that historically three or more consecutive closes at least 2 standard deviations below it’s 20-day SMA represented a favorable intermediate-term (one-week time frame) opportunity on the long side, especially in the event of some intraday weakness and/or a lower close on the following session (like today’s session) after the signal had been triggered.

The SPY was trading lower at least -1.0% below the trigger day’s close (in this event Tuesday’s close) four sessions later on only one out of 32 occurrences (limited downside potential), and posted at least one higher close (than the trigger day’s close) over the course of the then following four sessions on 31 out of those 32 occurrences (96.88%), significantly better than the at-any-time probability of at least one higher close over the course of the then following four sessions (76.64%). And the SPY already posted at least one higher close over the course of the then following three sessions on 29 out of those 32 occurrences.

In addition, with the Distribution of Returns (see stats above) above 70% four and five sessions later (and a Profit Factor of 6.64 four sessions later), the median trade ranks significantly better (means shows a significantly higher rate of return / positive magnitude of change) than the median trade (=50%) within the at-any-time distribution of returns four and five session later (low risk and high odds/reward).

Successful trading,
Frank

________________________________

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

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’m a bit busy these days with some private (building and moving into a new home in a couple of weeks) and business matters, so blogging (and Twitter updates) were (and will probably remain for a couple of days and weeks) light. I am sorry for any inconvenience.

On today’s Friday we’ll get the government’s November jobs report at 8:30 a.m. EST. Recently the ES E-MINI S&P 500 showed a significantly above-average tendency for closing higher (on 11 out of the last 13 occurrences, with one lower close in Oct. ’09 only) after a regularly rough start into the session (see first hour vs. previous close).

Table I below shows the ES E-MINI S&P 500’s intraday performance (since 11/01/2008) concerning the open, the end of the first hour vs. the previous close, the start of the last hour vs. the end of the first hour, the last hour of the session (between 03:00 p.m. and 04:15 p.m.) and the close on the last 13 Jobs Report Fridays.

________________________________

Bottom line:

At least based on historical probabilities and odds and the market’s recent performance on Jobs Report Friday, the outlook concerning the ES E-MINI S&P 500′ performance with respect to the final hour of the session and the close on Friday, December 4 is positive, but at least some follow-through of Friday’s weakness during the first part of the session seems likely.

A favorable short-term opportunity on the long side of the market would be provided in the event of any weakness during the first hour of today’s session (see stats above) targeting a positive second part of the session and a potential (probable) higher close as well.

Successful trading,
Frank

________________________________

Summary of potentially tradable edges for Monday – November 30, 2009

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

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.

Market internals were heavily lopsided on the downside, with declining issues (concerning all optionable stocks) outnumbering advancing issues by a factor of 16, and optionable stocks penetrating their previous session’s low posting a multi-year high (in absolute and percentage-wise terms), not surprisingly on a session where the ES E-MINI S&P 500 posted an intraday low -2.31% below the previous session’s low.

_________________________

The following setups (among others) were triggered on Friday’s close:

* ) : -

( * the setup doesn’t provide a statistically significant edge on any side of the market)

Table I shows the ES E-MINI S&P 500 performance on the close (since 01/01/1990) of the next session (in this event Monday, November 30) immediately following those sessions where setups S1 to S4 listed above had been triggered in the past.

Disregarding the fact that the ES E-MINI S&P 500 closed in the upper half of it’s daily trading range (on a session where the futures left an unfilled gap down, setup S1), probabilities and odds are at least slightly tilt in favor of a higher close on Monday’s session, and with respect to setup S3 (‘Optionable stocks Declining Issues outnumbered Advancing Issues by a factor of greater than 15‘), the ES E-MINI S&P 500 shows a perfect track record (unfortunately with 13 occurrences only) of up to now always posting at least one higher close (than the trigger day’s close) over the course of the then following three sessions (and on 12 out of 13 occurrences closing higher already two sessions later).

Setup S1 (‘the ES E-MINI S&P 500 closed in the upper half of it’s daily trading range on a session where the futures left an unfilled gap down‘) is a setup (among dozens of other setups) followed and tracked by Rennie Yang from MarketTells (highly recommended), and this is the only setup which puts the famous fly into the oinment – at least with respect to the close. But even with setup S1 triggered on close of the previous trading day, the ES E-MINI S&P 500 opened higher on 24 out of the last 28 occurrences.

Table II below shows the ES E-MINI S&P 500’s intraday performance (since 01/01/1990) concerning the open, the intraday high, the intraday low, the last hour of the session and the close on those sessions where setup S2 (‘the VIX CBOE Volatility Index surged higher greater than +20%‘) had been triggered on close of the previous trading day in the past.

It is interesting to note that – since 01/01/1990 and with respect to the then following session (in this event on Monday, November 30) – the ES E-MINI S&P 500

• opened higher on 2 out of every 3 occurrences,
• shows an above-average probability for some follow-through of the previous session’s weakness at least at some time during the session (negative t-score with respect to the intraday low),
• shows a statistically significant tendency for trading higher during the final hour of the session (on 3 out of every 4 occurrences, and thereof on the last 13 ocurrences), and finally
• shows a statistically significant tendency for a higher close (on 2 out of every 3 occurrences, and thereof on 10 out of the last 11 ocurrences).

So – from a historical and statistical perspective – Monday’s session might start on a positive note, with a temporary resumption of Friday’s downtrend probably during the first part of the session, but a happy (positive) ending into the close.

________________________________

Bottom line:

At least based on historical probabilities and odds and the market’s regular performance on the session after those setups listed above had been triggered on close of the previous trading day, the outlook concerning the ES E-MINI S&P 500′ performance with respect to the open, the final hour of the session and the close on Monday, November 30 is positive, but at least some follow-through of Friday’s weakness during the first part of Monday’s session seems likely.

A favorable short-term opportunity on the long side of the market would be provided in the event of any pre-opening weakness on Monday’s GLOBEX session targeting a higher open (but it doesn’t seem wise to chase a higher open) and probably at the start of the final hour of the session (see stats above), while a higher open and/or any significant strength during the first hour of Monday’s session might provide a favorable (very) short-term (and intraday only) opportunity on the short side playing the odds (which apply to almost all of those setups listed above) for a temporary pullback and some follow-through of Friday’s weakness during the first part of Monday’s session (closing the short position at the start of the last hour of the session at the latest).

Successful trading,
Frank

________________________________

Summary of potentially tradable edges for Monday – November 30, 2009

________________________________

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Disclaimer: No position in the securities mentioned in this post at time of writing (but short volatility).

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.

_________________________

The following setups (among others) were triggered on Monday’s close:

* ) : -

( * the setup doesn’t provide a statistically significant edge on any side of the market)

Table I below shows the ES E-MINI S&P 500’s intraday performance (since 01/06/2001) concerning the open, the intraday high, the intraday low, the end of the first hour of the session in comparison to the previous session’s close and the pre-opening low on GLOBEX on those sessions where setups S1 (‘the ES E-MINI S&P 500 left an unfilled gap up greater than +0.75%‘) had been triggered on close of the previous trading day in the past.

It is interesting to note that – since 01/06/2001 and with respect to the then following session (in this event on Tuesday, November 24) – the ES E-MINI S&P 500

• opened lower on 9 out of the last 11 occurrences,
• never left an unfilled opening gap up,
• was trading below the previous session’s close at the end of the first hour on 10 out of the last 11 occurrences,
• posted a median low of -0.84% (significantly lower than the at-any-time median low on GLOBEX of -0.26% only) below the previous session’s close on the then following GLOBEX session.

xx

Table II below shows the ES E-MINI S&P 500’s intraday performance (since 01/01/2005) concerning the open, the intraday high, the intraday low, the end of the first hour of the session in comparison to the previous session’s close and the pre-opening low on GLOBEX on those sessions where setups S5 (‘the ES E-MINI S&P 500 left an unfilled gap up, and Puts traded on a downtick outnumbered Puts traded on an uptick by a factor of greater than 1.75′) had been triggered on close of the previous trading day in the past.

It is interesting to note that – since 01/06/2001 and with respect to the then following session (in this event on Tuesday, November 24) – the ES E-MINI S&P 500

• opened lower on 20 out of the last 24 occurrences (and not up greater than +0.41%),
• posted an intraday high of greater than +1.00% on only 4 out of the last 24 occurrences,
• was regularly trading below the previous session’s close at the end of the first hour, and never managed a gain of greater than +0.81% at the end of the first hour on any of those 61 occurrences since 01/06/2001.

Due to the significantly above-average probability and odds for some weakness before or on the open on Tuesday’s session, or during the first hour of Tuesday’s session, a sell signal was triggered on close of Monday’s session.

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Bottom line:

At least based on historical probabilities and odds and the market’s regular performance on the session after those setups listed above had been triggered on close of the previous trading day, the outlook concerning the ES E-MINI S&P 500′ performance until the end of the first hour on Tuesday, November 24 is  negative, while the outlook with respect to the close is mixed (no edge provided).

A favorable short-term opportunity on the short side would be provided in the event of any pre-opening strength on Tuesday’s GLOBEX session targeting a lower open or some weakness during the first hour of Tuesday’s session.

Successful trading,
Frank

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Summary of potentially tradable edges for Tuesday – November 24, 2009

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xx

Disclaimer: Short ES E-MINI S&P 500 (and short DAX German Aktien Index) at time of writing.

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.

Thanksgiving (exchange holiday, with a shortened session on Friday, November 27) is celebrated on the fourth Thursday in November, this year on November 26.

I thought it would be interesting to check if – and to what extend – the market historically shows a positive or negative bias during the respective trading week (compassing Thanksgiving) until the end of the then following week (assumed one would have went long on close of the last business day the week immediately preceding Thanksgiving, in this event on Friday, November 20).

Table I shows the ES E-MINI S&P 500 performance over the course of the then following 10 sessions (since 01/01/1990) assumed one would’ve went long the ES E-MINI S&P 500 on close of the last business day the week immediately preceding Thanksgiving, in this event on Friday, November 20 (so ‘next session‘ equals the session on Monday, November 23).

It is interesting to note that – since 1990 – the ES E-MINI S&P 500

• was trading higher 10 sessions later (regularly the Friday of the week immediately following Thanksgiving) on 3 out of every 4 occurrences, while the at-any-time probability for a higher close 10 sessions later is only slightly better than even,
• the median close 10 sessions later was +1.04% (means the market closed higher than +1.04% on 9 sessions, and lower than +1.04% on 9 sessions as well, separating the higher half of a sample from the lower half), while the at-any-time median trade 10 sessions later is +0.28% only (and the profit factor significantly exceeds the at-any-time profit factor),
• was never trading lower than -5.36% below the trigger day’s close (even intraday) during the entire 10-day period,
• and there were only 2 (out of 19) occurrences (marked with an asterisk) where the ES E-MINI S&P 500 did not manage a close above the trigger day’s close on even a single session during the entire 10-day period.

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Bottom line:

At least based on historical probabilities and odds, the market shows a positive performance over the course of the then following 10 sessions (during the week compassing Thanksgiving and the then following week), and there is a significantly above-average probability that the ES E-MINI S&P 500 will be trading above last Friday’s close (1090.00) on Friday, December 11.

Successful trading,
Frank

________________________________

If you might want to be instantly notified about what’s happening in the markets and at TRADING THE ODDS, I encourage you to subscribe to my RSS Feed or Email Feed, and (or) follow me on Twitter.

xx

Disclaimer: Long ES E-MINI S&P 500 at time of writing (and short volatility).

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.

On Friday’s session the ES E-MINI S&P 500 posted it’s intraday high already during the first hour the third day in a row (which has bullish implications with respect to Monday’s session), and managed a close in the upper half of it’s daily trading range the sixth day in a row.

Especially remarkable: On Friday’s session the ES E-MINI S&P 500 left an unfilled opening gap down (intraday high below the previous session’s close) immediately following a session where the ES E-MINI S&P 500 couldn’t manage to post an intraday high above the previous session’s low (the high equaled the previous session’s low, otherwise it would’ve been an unfilled gap down). That never happened since 07/19/2000, and there were only 8 occurrences since 01/01/1990 (the ES E-MINI S&P 500 closed higher on 6 out of those 8 occurrences the next day).

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The following setups (among others) were triggered on Friday’s close:

* ) : -

( * the setup doesn’t provide a statistically significant edge on any side of the market)

Table I shows the ES E-MINI S&P 500 performance on the close (since 01/01/1990) on the next session (in this event Monday, November 23) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past.

Probabilities and odds are clearly tilt in favor of a positive performance (close) on the then following session, and the respective t-score always exceeds the +1.645 mark (with respect to both vs. chance and vs. market) for statistical significance, means there is a low probability that the positive performance (and out-performance of those setups listed above in comparison to the market) occurred by chance only.

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Table II below shows the ES E-MINI S&P 500’s intraday performance (since 01/06/2001) concerning the open, the intraday high, the intraday low, the close and the end of the first hour of the session in comparison to the previous session’s close on those sessions where setups S3 (‘the ES E-MINI S&P 500 left an unfilled opening gap down two days in a row‘) had been triggered on close of the previous trading day in the past.

It is interesting to note that – since 01/06/2001 and with respect to the then following session (in this event on Monday, November 23) – the ES E-MINI S&P 500

• opened higher on 3 out of every 4 occurrences (and never lower than -0.91%), and higher on the last 8,
• never left an unfilled opening gap down for a third day in a row ,
• downside potential during the session was regularly limited, the median losing trade on the intraday low is significantly smaller than the median at-any-time losing trade on the intraday low,
• closed lower than -1.0% on only 1 out of 30 occurrences, but higher greater than +1.0% on 11 out of those 30 occurrences,
• was trading above the previous session’s close at the end of the first hour on approximately 3 out of every 4 occurrences (and never lower than -0.86%).

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Table III below shows the ES E-MINI S&P 500’s intraday performance (since 01/01/2005) concerning the open, the intraday low, the close, the time of the intraday high and the time of the intraday high on those sessions where setups S1 (‘the ES E-MINI S&P 500 posted it’s intraday high during the first hour of the session three days in a row‘) had been triggered on close of the previous trading day in the past.

It is interesting to note that – since 01/06/2001 and with respect to the then following session (in this event on Monday, November 23) – the ES E-MINI S&P 500

• opened higher on 9 out of the last 10 occurrences and 16 out of the last 19 occurrences,
• left an unfilled opening gap up on 6 out of the last 10 occurrences and 10 out of the last 20 occurrences, way above the respective at-any-time probabilities for leaving an unfilled opening gap up,
• closed higher on 9 out of the last 10 occurrences and 16 out of the last 19 occurrences,
• posted it’s intraday low already during the first hour of the then following session on 8 out of the last 10 occurrences, but posted it’s intraday high during the first hour of the then following session on only one out of the last 20 occurrences, and
• posted it’s intraday high after the low (in chronological order) on 16 out of the last 20 occurrences. (for a significantly above-average probability that the low will be made during the first hour of Monday’s session – weakness providing a buying opportunity – while the high will be made at a later stage of the session).

So there is a significantly above-average probability that the intraday low (even if the ES E-MINI S&P 500 would never be trading below Friday’s close during the first hour of Monday’s session) will be made during the first hour of Monday’s session. With respect to the last 25 occurrences the median time of the intraday low was 43 minutes after the open and therefore significantly (an hour) earlier than on an ‘average’ (at-any-time) session, and the intraday high was – on average – posted approximately 4 hours into the session -, almost an hour later than on an ‘average’ (at-any-time) session. So any weakness during the first hour of Monday’s session will probably provide a favorable buying opportunity targeting a (significantly) higher quote at a later stage during the session.

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Bottom line:

At least based on historical probabilities and odds and the market’s regular performance on the session after those setups listed above had been triggered on close of the previous trading day, the outlook concerning the ES E-MINI S&P 500′ performance on close of Monday, November 23 is positive, and with market internals  lopsided on the downside on Friday’s session again (on top of the second consecutive unfilled opening gap down), downside potential on Monday’s seems to be limited.

A favorable short-term opportunity on the long side would be provided (again) in the event of any pre-opening weakness on Monday’s GLOBEX session or any weakness during the first hour of Monday’s regular session targeting a (significantly) higher high during the session (at a later stage) and probably a higher close as well.

Successful trading,
Frank

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Summary of potentially tradable edges for Monday – November 23, 2009

________________________________

If you might want to be instantly notified about what’s happening in the markets and at TRADING THE ODDS, I encourage you to subscribe to my RSS Feed or Email Feed, and (or) follow me on Twitter.

xx

Disclaimer: Long ES E-MINI S&P 500 at time of writing (and short volatility).

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.