1. Setups
2. Bottom Line
3. Tradable Edges

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At least until the end of the first hour of Thursday’s session it seemed that the trading day would be fully compliant (means a probably negative close) to the most recent market history (7 lower closes) after the the ES E-MINI S&P 500 had posted a higher high (than the previous session’s high), but closed below the previous session’s low on the previous trading day:

The ES E-MINI S&P 500 opened lower, was trading lower in comparison to Wednesday’s close at the end of the first hour of Thursday’s session, and was trading significantly below Wednesday’s close at least once during Thursday’s GLOBEX session. A trend-day up was – at least with respect to recent historical probabilities and odds – the least expected outcome (but trading is all about probabilities, never certainties).

Financials made the largest comeback on Thursday’s session, the third above +/-3.0% end-of-day gain/loss during the last 10 sessions.

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The following setups were triggered on Thursday’s close:

* ) : -

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

Due to the fact that at time of writing (00:25 AM) the ES E-MINI S&P 500 hasn’t posted a (pre-opening) low of less than -0.25% on the GLOBEX session (since 04:30 PM on Thursday), I thought it would be much more interesting to show if – and to what extend – this might have any implications for today’s (Friday, October 23) session (a recovery day and bullish engulfing pattern – opening below the previous session’s close and a close above the previous session’s open after the ES E-MINI S&P 500 had posted a black candle – a close below the open – the day before has probably positive implications as well with an above-average probability and profit factor for another higher close).

Table I below shows the ES E-MINI S&P 500′s intraday performance (since 11/01/2008, one year history) concerning the pre-open low (GLOBEX until 03:30 AM), the GLOBEX (24 hour) low, the (end of the) first hour of the session compared to the previous close, the (start of the) last hour of the session compared to the previous close and the close (in chronological order) on those sessions where the ES E-MINI S&P 500 did not post a pre-open low on GLOBEX of less than -0.25% before the open (from the start of the GLOBEX session at 04:30 PM on the previous day until the open at 09:30 AM).

Interesting to note that – since 11/01/2008 – the ES E-MINI S&P 500

• was trading above the previous session’s close at the end of the first hour of the session on 43 out of 50 occurrences (and lower at least -1.0% only once),
• was trading above the previous session’s close at the start of the last hour of the session on 41 out of 50 occurrences (and lower at least -1.0% only once, a year ago),
• closed higher on 39 out of 50 occurrences, and lower -0.75% or more on only 3 occurrences (never since 03/23/2009, the last 38 occurrences).

The absence of any pre-opening weakness seems to be highly indicative – at least probabilities, odds and the t-scores are way above their respective at-any-time probabilities and odds – for a positive performance during all stages of the following session, and downside potential will probably be limited (to say the least).

And even in the (regular) event the ES E-MINI S&P 500 posted an intraday low (during the regular session) below the previous session’s close (on 43 out of 50 occurrences, there were only 7 occurrences where the ES E-MINI S&P 500 was never trading below the previous session’s close during the 24-hours GLOBEX session including the regular session), the market was regularly able to recoup it’s intraday losses into a positive close.

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Bottom line:

In the event the ES E-MINI S&P 500 wouldn’t have posted a pre-opening low of less than -0.25% on the GLOBEX session until todays’s open (ES E-MINI S&P 500 not trading below 1088), this would have positive implications for today’s session.

A favorable opportunity on the long side might be provided in the event of any weakness during the first hour of today’s session targeting some (significantly) follow-through of Thursday’s strength into a (probably) higher close.

Successful trading,
Frank

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Summary of potentially tradable edges for Friday – October 23, 2009

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Disclaimer: No positions 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.

1. Setups
2. Bottom Line
3. Tradable Edges

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é voilà. Even Apple’s earnings – released after after Monday’s close – and the (pre-opening) positive futures were not able to prevent the Russell 2000 from trading significantly below Monday’s close (for another profitable trade, although -and unfortunately- I took profits way too early) during Tuesday’s session (being the weakest of the major US market indices), as indicated by those setups which were triggered on Monday’s close ( see my posting Trading the Odds on Tuesday – October 20, 2009 ).

In addition, the ES E-MINI S&P 500 complied to the forecasted slightly negative bias of the close.

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Momentum & Trend	xx	Wilder’s DMI
Index / Future / ETF	Date	+DI(5)	-DI(5)	DX(5)	RSI(2)	Comments
E-MINI S&P 500	10/20/2009	36.10	12.42	48.80	62.85
S&P 500	10/20/2009	32.84	11.53	48.01	43.43
Nasdaq 100	10/20/2009	33.04	12.49	45.12	74.09
Russell 2000	10/20/2009	23.38	23.68	0.64	26.58
Semiconductor Index	10/20/2009	26.53	23.70	5.63	47.65
Philadelphia Bank Index	10/20/2009	18.70	28.95	21.51	12.33

The Philadelphia Bank Index closed lower the fourth day in a row, but at least ended it’s streak of up to then three sessions of under-performing the S&P 500 by a wide margin of -1.0% or more (now providing a potential edge on Wednesday’s session).

_________________________

Unfortunately Tuesday’s session did not leave much to lean on short-term. The following setups were triggered:

* ) : -

( * 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 01/01/2008) concerning the open, the intraday high, the intraday low, the (end of the) first hour of the session compared to the previous close and the close (in chronological order) on those sessions immediately following a trading day where a lower close for the ES E-MINI S&P 500 coincidenced with a lower close for the BKX Bank Index on the fourth consecutive session.

Interesting to note that – since 01/01/2008 and with respect to the then following session (in this event Wednesday, October 21) – the ES E-MINI S&P 500 always posted an intraday high regularly significantly above the previous session’s close (means out of 26 occurrences it never left an unfilled opening gap on the downside) , was regularly trading above the previous session’s close after the first hour of the then following session (on 19 out of 26 occurrences) and closed higher on 8 out of the last 9 occurrences.

________________________________

Bottom line:

At least based on historical probabilities and odds and the market’s regular performance on the session after any of 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 Wednesday, October 21 is positive, but the respective t-score did not justify to enter into a long overnight position with respect to / targeting a potential higher open on Wednesday’s session.

But a favorable opportunity on the long side might be provided in the event of some follow-through of Tuesday’s weakness (which seems – at least with respect to historcial occurrences – all-but-certain) before, on or shortly after Wednesday’s open targeting a (significant higher) intraday high and a probable higher close as well.

Successful trading,
Frank

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Summary of potentially tradable edges for Wednesday – October 21, 2009

________________________________

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Disclaimer: No positions 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.

1. Setups
2. Bottom Line
3. Tradable Edges

xx

Monday’s session again provided two favorable (and profitable) opportunities, the first one on the short side of the market when the ES E-MINI S&P 500 was trading significantly higher before the open (when the ES E-MINI S&P 500 left an unfilled opening gap down on a Friday, it never left an unfilled opening gap up greater than +0.71% on the then following session, 75 occurrences since 01/01/2000), and the second one on the long side of the market when especially the NQ E-MINI Nasdaq 100 was trading below Friday’s close although it opened up +0.46% (for the desired weakness early in the session in the event of a higher open, see my posting Trading the Odds on Monday – October 19, 2009 ).

Unfortunately – regarding the long position in Nasdaq 100 futures – I took profits way too early, but there was no indication that we could get such a a trend day with respect to the Nasdaq 100.

In addition, the market more than complied to the forecast that Monday’s open would probably be highly indicative for the direction of the close.

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Momentum & Trend	xx	Wilder’s DMI
Index / Future / ETF	Date	+DI(5)	-DI(5)	DX(5)	RSI(2)	Comments
E-MINI S&P 500	10/19/2009	45.00	14.09	52.32	74.64
S&P 500	10/19/2009	40.51	13.63	49.65	75.22
Nasdaq 100	10/19/2009	31.59	15.38	34.53	74.09
Russel 2000	10/19/2009	31.33	21.36	18.92	66.87
Semiconductor Index	10/19/2009	21.89	28.18	12.56	54.43
Philadelphia Bank Index	10/19/2009	21.93	33.95	21.51	15.98

Despite the fact that the ES E-MINI S&P 500 closed at a 1-month and 3-month high, upside momentum on the Russel 2000 and SOX Semiconductor Index is waning (+DI(5) closed lower), and the Bank Index closed (significantly) lower under-performing the S&P 500 by a wide margin of -1.0% or more the third day in a row (one would’ve assumed these indices would be leading on the upside, but not significantly lagging). .,

_________________________

On Monday’ session the following setups were triggered:

* ) : -

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

Whenever the ES E-MINI S&P 500 closed at a 1-month or 3-month high (with strong gains on the close) in the past (at least since 2000), it traded flat to down on the then following session, but the most favorable setup is probably provided by the Russel 2000.

Table I below shows the Russel 2000′s intraday performance (since 01/01/2009) concerning the open, the intraday low, the intraday high, the close and the close versus the open (in chronological order) on those sessions immediately following a trading day where the ES E-MINI S&P 500 had closed at a 1-month or 3-month high, with solid gains of at least +0.75% and a close in the upper half of the daily trading range.

Interesting to note that despite the recent run-up in the markets, the Russel 2000 never left an unfilled opening gap up, left an unfilled gap down on 6 out of 23 occurrences, always posted a low at least -0.65% below the previous session’s close, closed higher on only 7 out of 23 ocurrences and lower on the last 5 occurrences.  Although the open may not be accurate (as it is the case for almost all major market indices), from a bull’s perspective this is nothing to write home about. Therefore I went short Russel 2000 Mini Futures (TFZ9) at Monday’s close (see my respective Twitter Update).

Even the ES E-MINI S&P 500 never left an unfilled opening gap on the upside when the respective setup (equals the combination  of setups S2 and S3 listed above) had been triggered since 01/01/2009, but the Russel 2000 showed a significantly greater downside (and therefore potential profit) potential on the then following session.

________________________________

Bottom line:

At least based on historical probabilities and odds and the market’s regular performance on the session after any of 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 Tuesday, October 20 is mixed, with a slightly downside bias (not taking into account Apple’s earnings and the positive reaction of ES E-MINI S&P 500 futures).

Let’s see if Apple’s earnings (the ES E-MINI S&P 500 and the Russel 2000 are trading approximately +0.50% and +0.75% respectively above Monday’s close at time of writing) will be responsible for the first occurrence in 2009 where the ES E-MINI S&P 500 and the Russel 2000 could leave an unfilled opening gap on the upside after the ES E-MINI S&P 500 had closed at a 1-month or 3-month high with strong gains on close of the previous trading day.

Successful trading,
Frank

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Summary of potentially tradable edges for Tuesday – October 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: Short Russel 2000 Mini Futures (TFZ9) 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.