On January 17, 2010, I mentioned that although since 01/01/2009 the SPY always posted a higher close (than the trigger day’s close) 4 and 5 sessions later (after the SPY’s 2-day RSI closed above 96), it was the first occurrence (since 01/01/2009) that the SPY was trading below the trigger day’s close 4 and 5 sessions later  which could be an early indication that upside momentum is waning and and the market could’ve reached a short- or intermedium term top (see my posting Weakness and Calender Effects). Not the worst call …

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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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.

On Thursday’s session European indices (and futures on US major market indices) tanked on Dubai news (the ES E-MINI S&P 500 was temporarily down -3.75%), but although US major market indices closed sharply lower on Friday’s half trading day, the ES E-MINI S&P 500 was able to recoup more than half of it’s pre-opening and intraday losses and closed in the uppper half of it’s intraday trading range.

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

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

________________________________

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xx

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.

This is a follow-up to my post TRADING THE ODDS on Monday – November 23, 2009 .

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.

_______________________________

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 Thursday’s session market internals were heavily lopsided on the downside, but nevertheless the ES E-MINI S&P 500 managed to close in the upper half of it’s daily trading range the fifth day in a row.

The ES E-MINI S&P 500 left an unfilled opening gap on the downside of -0.70%, Puts traded on an uptick (regularly purchased) outnumbered Puts traded on an downtick (regularly sold) – the first occurrence during the last 12 sessions, and only happens on approximately one out of every ten sessions -, Calls traded on a downtick (regularly sold) outnumbered Calls traded on an uptick (regularly bought) by a factor of 1.75 – the first occurrence during the last 13 sessions -, and more than 85% of all optionable stocks penetrated their previous session’s low.

_________________________

The following setups (among others) were triggered on Thursday’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 Friday, November 20) 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 regularly exceeds the +1.645 mark for statistical significance, means there is a low probability that the positive performance (amd out-performance of the market) occurred by chance only.

In addition, the median trade over the course of the then following 5 sessions is positive as well, partly significantly exceeding the respective at-any-time median change over the course of the then following 5 sessions (and probabilities for a higher close 2, 3, 4 and 5 sessions later exceed the respective at-any-time probability for a higher index close 2 – 5 sessions later).

________________________________

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 Friday, November 20 is positive, and with market internals heavily lopsided on the downside on Thursday’s session, downside potential on Friday’s seems to be limited.

A favorable short-term opportunity on the long side would be provided in the event of any pre-opening weakness on Friday’s GLOBEX session targeting a higher open and probably a higher close as well.

Successful trading,
Frank

________________________________

Summary of potentially tradable edges for Friday – November 20, 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: No positions 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.

On Friday’s session the ES E-MINI S&P 500 managed a small gain on the close, but did never seriously challenge Thursday’s intraday high.

But there was some remarkable weakness beneath the surface: Despite the fact that almost all US major market indices (S&P 500, ES E-MINI S&P 500, Nasdaq 100, Dow Jones, except the Russel 2000) posted a higher low (than the previous session’s low), the majority of stocks listed in the respective indices did not: more than 55% of S&P 500 stocks and more than 60% of all optionable stocks penetrated their previous session’s low, which is regularly a reliable indication for some weakness beneath the surface and has – with respect to historical occurrences – led more often than not to an above-average pre-opening weakness, a weak open and/or limited upside potential (potential magnitude of change on the intraday high) on the then following (GLOBEX) session (see below).

Some other remarkable peculiarities: The Nasdaq 100 out-performed the S&P 500 the fourth day in a row, and the SOX Semiconductor Index out-performed the S&P 500 the fifth day in a row, while the BKX Bank Index under-performed the S&P 500 by a wide margin of almost 1.0% the second day in a row.

Regime shift: On November 5, 6 and 9 the ES E-MINI S&P 500 posted it’s intraday low always during the first hour of the session while the intraday high was regularly made during the final hour of the session. On November 10, 11 and 12 the ES E-MINI S&P 500 posted it’s intraday high always during the first hour of the session while the intraday low was made at later stages of the session (during the first half – but after the first hour – of the session on November 10, during the second half of the session – but before the final hour – on November 11, and during the final hour of the session on November 12).

_________________________

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 below shows the ES E-MINI S&P 500’s intraday performance (since 01/06/2001) concerning the open, the intraday low, the end of the first hour of the session in comparison to the previous session’s close, the pre-open (GLOBEX) high and the pre-open (GLOBEX) low on those sessions where any of setups S2, S3 or S4 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 16) – the ES E-MINI S&P 500

• opened lower on 2 out of every 3 occurrences,
• posted a median (not average) intraday low of -0.94%,
• was trading below the previous session’s close at the end of the first hour on 2 out of every 3 occurrences, and greater than +0.30% on only 2 out of 28 occurrences,
• was trading lower at least -0.50% below the previous session’s close on the then following GLOBEX session on 10 out of the last 11 occurrences.

Table II below shows the ES E-MINI S&P 500’s intraday performance (since 01/06/2001) concerning the open, the intraday low, the end of the first hour of the session in comparison to the previous session’s close, the pre-open (GLOBEX) high and the pre-open (GLOBEX) low on those sessions where setup  S4 had been triggered on close of the previous trading day in the past.

Although 11 occurrences since 01/01/1990 is nothing to read anything statistically significant into it and even more nothing to bet the farm on, it at least confirms the negative forecast not only with respect to the expected weakness before or on Monday’s open, but with respect to Monday’s close as well (although a setup like three consecutive sessions with a positive first and last hour, but negative middle part of the session is more a statistical anomaly than anything to read something meaningful into into, quite different from setups S2 and S3 where the index posted a higher low, but the majority of stocks did not for a remarkable negative divergence).

In addition:

• with setup S1 triggered on close of the previous trading day, on 10 out of the last 20 occurrences (50%) did the ES E-MINI S&P 500 post it’s intraday low during the first hour of the then following session, while on 12 out of the last 20 occurrences did the ES E-MINI S&P 500 post it’s intraday high in the second half of the then following session,
• the ES E-MINI S&P 500 posted it’s intraday low during the first hour of the session on 16 out of the last 27 Monday’s (60%) – significantly skewed in favor of the first hour of the session -, and posted it’s intraday low before it posted it’s intraday high on 19 out of the last 27 Monday’s (70%).

So there is a good chance that Monday’s intraday low will probably be posted early during the regular session and probably before the high, for a low(er) probability that the open short position (if not already closed before the open) will be stopped out before it could hopefully be closed for a profit.

________________________________

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 before or on the open on Monday, November 16 is negative, and additionally upside potential seems to be limited (therefore I went short on Friday’s close targeting a pre-opening quote at least -0.50% below Friday’s close).

A favorable short-term opportunity on the short side would be provided in the event of any pre-opening strength on Monday’s GLOBEX session (beginning at Sunday 06:00 PM EST) targeting a lower open and probably some wekaness during the session as well.

Successful trading,
Frank

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Summary of potentially tradable edges for Monday – November 16, 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: Short ES E-MINI S&P 500 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.