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.

Table I below shows the SPY‘ historical performance (since 01/01/1990) over the course of the then following five sessions after the VIX surged 20% or more on a single session in the past.

Interesting to note that since 1991 (32 occurrences) the SPY never lost more than -0.51% on the close of the then following session (the exception of the rule was the year 1990), and closed higher on 27 out of 37 occurrences (thereof higher on the last 10 occurrences) on the then following session. With a historical Profit Factor of 5.13 and Distribution of Returns at 70% (the median trade shows a significantly higher rate of return / positive magnitude of change than the median trade (=50%) within the at-any-time distribution of returns), odds are heavily lopsided in favor of a positive outcome (means a higher close) on Friday’s session.

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: 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.

By streamlining a couple of conditions and the respective set of parameters as well as utilizing Bollinger Bands for identifying areas of short-term mean reversion tendencies, I was able to increase cumulative returns 10-fold (22,’3 mio. % since 01/01/1990) and to achieve a compounded annual growth rate of 85.13%, while maximum drawdown and the respective maximum number of sessions in a drawdown were cut in half (with respect to the long side of the strategy, now 8.86% only during a 20-year time frame).

But although the model is not ‘adaptive‘ (no additions/changes/cancellations/modifications to conditions, parameters and/or dependencies based on the then current market environment), and although with respect to out-of-sample or walk-forward testing the odds of selecting something which was all by chance (and purely random) decreases exponentially as one uses a larger test set (in this case more than 5,000 data points/trading days), and although the model shows a t-score in excess of 1.645 in almost all of the last 20 years (means there is a low probability that the model’s out-performance in comparison to the general market occured by chance only), there is still the risk of overfitting which will be my major concern and challenge for the next couple of weeks (taking some complexity out of the model).

Table I below shows the (updated) SPY‘s (S&P 500 ETF) performance (cumulative returns) since 01/01/1990. Setup 2 represents the long side (long trades only) of the strategy, setup 3 represents the short side (short trades only) of the strategy, and setup 1 the overall stratgey as a combination of long and short trades.

All initial basic parameters are still in place (leaving room for improvement and optimization at a later stage), and the model is still not optimized on the short side, which means a short trade is always triggered if no buy setup is triggered although it might be wise to take no position at all (instead of going short) if no edge is provided on any side of the market:

• For backtesting the SPY (SPDR S&P 500 ETF) will be utilized (adjusted for dividend and cash payments in order to track the S&P 500 as close as possible) which corresponds generally to the price and yield performance, before fees and expenses, of the S&P 500 Index.
• Positions will be entered into or an open position closed at the market’s regular close only (market-on-close orders).
• No (intraday) stops (buy and/or sell stops) will be used even if the SPY (S&P 500 EFF) is being utilized.
• No position sizing, the model is always ‘all in‘ (e.g. no Kelly, optimal f, fixed fraction, …).
• No leverage taken (no double or triple-leveraged ETFs are used).
• No abnormal market filter will be used (e.g. during phases of extremly high/low volatility, strong trending markets, the market’s lacking compliance to the model’s forecasts with a resultant number of consecutive losses and/or serious drawdown, and and and)
• No adaptations (no changes and/or cancellations/additions of formulas, conditions, and model parameters over the course of the lifetime of the model/during backtesting).
• The model (and respective performance figures) does not account for slippage, transactions costs (commissions, exchange and regulatory fees), and interest on idle balances.

Year by year performance stats can be found here (1990 – 1999) and here (2000 – 2009). Please click on ‘View full size‘ on the top right of the picture(s).

Figure I below shows the respective equity curve (setup 1 as the combination of long and short trades, setup 2 -longs only- and setup 3 -shorts only-) from 01/01/1990 to 12/31/1999.

Figure II below shows the respective equity curve (setup 2 -longs only- in blue, and setup 3 -shorts only- in red) from 01/01/2000 to 12/31/2007.

Figure III below shows the respective equity curve (setup 2 -longs only- in blue, and setup 3 -shorts only- in red) from 01/01/2008 to 12/28/2009.

For those interested in, the model’s signals will be posted from January 4, 2010 (next Monday) onward regularly shortly before the close (but even if posted shortly after the close, the SPY is still availabe for trading with good liquidity and narrow spreads of regularly $0.01) via Twitter Update by following a new Twitter account @Strategy_I . (making further improvements to the model – e.g. optimization of the short side and reducing the chance of overfitting – as well as introducing position sizing, leverage, abnormal market filters, implementing buy/sell stops and probably making the model ‘adaptive‘ will be an ongoing process in 2010)

But please be reminded that past performance is never an indication (leave alone a guarantee) for future performance, and for good reason the CFTA and NFA (COMPLIANCE RULE 2-29: USE OF PROMOTIONAL MATERIAL CONTAINING HYPOTHETICAL PERFORMANCE RESULTS) requires all members (which I’m not) to explicitely reference to limitations, risks, lack of liquidity, among others, and publish a respective disclaimer.

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: 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.

Friday’s session complied in every way to (the heavily lopsided negative) historical probabilities and odds (even to the magnitude of change on the intraday low and on the close) where either the CBOE Volatility Index (VIX) had closed lower at least -11% on the previous session, or the ES E-MINI S&P 500 had posted a large white candle immediately following a large black candle  – with some significant weakness beneath the surface due to the relatively high number of stocks penetrating their previous session’s low despite the fact that the S&P 500 itself posted a significantly higher low – in the past ( see my posting Trading the Odds on Friday – October 30, 2009 ).

Market breadth was extremely lopsided on the downside, 20:1 negative for both Advancing / Declining Issues (0.04) and Advancing / Declining Volume (0.04) in S&P 500 stocks. It was the third out of the last 5 sessions where Advancing / Declining Volume in S&P 500 stocks closed below 0.15 (first occurrence since 01/01/1990). With Advancing / Declining Volume in S&P 500 stocks closing below 0.15 on two out of the last three sessions (16 occurrences since 01/01/1990), the ES E-MINI S&P 500 was always trading at a higher level (above the trigger’s day close) within the next three sessions (on 15 occurrences already within the next two sessions).

What had triggered a spot-on sell signal on Thursday’s close (in this event a VIX closing lower at least -20%) applies the other way around as well. The VIX closed higher +23.95% on Friday’s session, and with respect to historical occurrences this had been a reliable indication that downside potential on close of the then following session will probably be limited to say the least (see stats below).

_________________________

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 01/01/2000) on the next session (in this event Monday, November 2) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past.

All setups are agreeing concerning their positive outlook on the then following session, showing an above-average probability and significantly above-average profitability (average gain) for a higher close (over the course of) the next session(s). Not one of those setups shows an average (!) loss over the course of the then following five sessions. With setup S5 triggered on close of the previous session (unfortunately 20 occurrences only), the ES E-MINI S&P 500 never closed lower than -0.51% on the then following session (while the average winning trade on the close exceeds +2.00%).

Table II below shows the ES E-MINI S&P 500’s performance (since 01/01/1990) over the course of the then following five sessions. What will probably present a favorable opportunity on the long side with respect to the then following session (in this event Monday, November 2), might present a selling opportunity on close of the then following session. On only 3 out of 20 occurrences did the ES E-MINI S&P 500 post a close above the next session’s close two days later (in this event there is an historical 85% probability that the ES E-MINI S&P 500 will post a lower close on Tuesday’s session in comparison to whatever will be the close on Monday, although 20 occurrences since 01/01/1990 is a bit too low to read anything statistically relevant into it).

________________________________

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′ close on Monday, November 2 is positive.

A favorable short-term opportunity on the long side might be provided in the event of any pre-opening weakness and/or a lower open targeting a significantly higher intraday high and probably a higher close as well. But due to the fact that volatility is (significantly) on the rise, and regularly there is some follow-through of the previous session’s weakness either before or during the first part of the then following session, I wouldn’t chase a higher open but wait for a quote at or aournd -0.75% below Friday’s close before I’d make any serious commitments on the long side (or increase my stake respectively; I’m already positioned on the long side).

Successful trading,
Frank

________________________________

Summary of potentially tradable edges for Monday – November 2, 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 mantioned in this post at time of writing (long DAX German Aktien Index).

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.

It might appear that I’m addicted to blogging about the financial markets (my original intention was to take a couple of days off), but some of those setups triggered at today’s close are way too interesting.

Despite the fact that all major market indices posted a reversal day and partly not only closed above the previous session’s close but above the previous session’s high as well, not all stocks were participating likewise, and there was some (significant) weakness beneath the surface (the relatively high number of stocks penetrating their previous session’s low). The VIX (CBOE Volatility Index) recouped all of yesterday’s losses (and some), and closed below Tuesday’s close.

_________________________

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 01/01/2000) on the next session (in this event Friday, October 30) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past.

All setups are agreeing concerning their negative outlook on the then following session, showing a significantly above-average probability (at least 3:1) and significantly below-average profitability (average gain) for a lower close (over the course of) the next day(s). Not one of those setups shows an average (!) gain over the course of the then following five sessions.

Table III below shows the ES E-MINI S&P 500’s intraday performance (since 01/06/2001) concerning the open, the intraday low (regular session), the end of the first hour of the session (in comparison to the previous session’s close), the start of the last hour of the session (compared to the previous session’s close) and the close on those sessions (in this event Friday, October 30) immediately following a trading day where the VIX CBOE Volatility Index had closed lower at least -11.0% in the past (Setup S4).

Interesting to note that – since 01/06/2001 and with respect to the then following session (in this event Friday, October 30) – the ES E-MINI S&P 500

• opened lower on 2 out of every 3 occurrences,
• posted an intraday low of at least -2.0% on 11 out of the last 13 occurrences,
• was trading at least +0.50% above the previous session’s close at the end of the first hour of the then following session on only 4 out of 44 occurrences (maximum gain +0.81%),
• was trading at least +0.50% above the previous session’s close at the start of the last hour of the then following session on only 5 out of 44 occurrences (maximum gain +1.05%),
• closed (partly significantly) lower on 12 out of the last 13 occurrences.

Table III below shows the ES E-MINI S&P 500’s intraday performance (since 01/06/2001) concerning the open, the intraday low (regular session), the end of the first hour of the session (in comparison to the previous session’s close), the start of the last hour of the session (compared to the previous session’s close) and the close on those sessions (in this event Friday, October 30) immediately following a trading day where the ES E-MINI S&P 500 posted an open above the previous sessions close and closed above the previous sessions’s open (with +/-1% between open and close on both sessions), means a large black candle (Wednesday’s session) immediately followed by a large white candle (Setup S1).

________________________________

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 Friday, October 30 is negative.

A favorable short-term opportunity on the short side might be provided in the event of any pre-opening strength and/or a higher open targeting a significantly lower intraday low and probably a lower close as well.

Successful trading,
Frank

________________________________

Summary of potentially tradable edges for Friday – October 30, 2009

optimal f = ([( win/loss ratio + 1 ) * probability of a winning trade ] – 1 ) / ( win/loss ratio ) ;
win/loss ratio = avg. gain on a winning trade / avg. loss on a losing trade ; /% simplified version ;
Pos. Size (in $) = MAX [Intraday / Overnight Initial Margin ; Maximum Losing Trade (in $) / optimal f ] ;

Margin requirements:
ES E-MINI S&P 500 (ES): Intraday Initial Margin = $2,250 ; Overnight Initial Margin = $5,625 ;
ES E-MINI Nasdaq 100 (NQ): Intraday Initial Margin = $1,750 ; Overnight Initial Margin = $3,500 ;
Russel 2000 Mini Futures (TF): Intraday Initial Margin = $2,500 ; Overnight Initial Margin = $5,000)
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³⁾Position size in units per $xxx of marginable equity; if the E-MINI S&P 500, the E-MINI NASDAQ 100 or Russel 2000 Mini Futures are utilized, the number in brackets equates to the number of contracts, otherwise to the number of leveraged Exchange-Traded Funds (ETFs) of 300% of the (inverse) performance of the underlying index, assumed a fixed marginable equity of $100,000

________________________________

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.

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Disclaimer: ShortES E-MINI S&P 500 and long volatility 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.

Tuesday’s session finally broke the streak of 21 consecutive sessions so far where the ES (E-MINI S&P 500) didn’t loose -0.60% or more on the close and 12 consecutive session where the BKX Bank Index out-performed the ES (E-MINI S&P 500), and for the first time during the last couple of weeks the market didn’t manage to recoup the majority of it’s intraday losses into the close.

In addition it was the first time since 01/01/2000 (76 occurrences / FOMC announcement days) that the Dow Jones Industrial lost more than -1.0% during the first hour of the session on a pre-FOMC announcement day (which probably applies to the ES E-MINI S&P 500 as well due to the regularly high correlation between both indices).

Due to the fact that the official opening quatation for the Dow Jones Industrial is regularly a ‘fake’ (means there is regularly a huge deviation between the Dow Jones’ opening quatation and the ES’ E-MINI S&P 500 opening quotation, and the Dow Jones’ opening quotation regularly more ore less equals the previous close), I re-calculated the Dow Jones’ opening quotation based on the percentage-wise change of the ES’ E-MINI S&P 500 opening, so the figures should reflect the Dow Jones Industrial’s ‘real’ performance during the first hour of the session and will probably match the ES’ E-MINI S&P 500 performance during the first hour of a session very closely as well.

The ES (E-MINI S&P 500) opened lower -0.62%, posted an intraday low of -1.74% and an intraday high of -0.57% below Monday’s close (and therefore left an unfilled opening gap on the downside), and finally closed lower -1.44% on the day, while the Nasdaq 100 closed lower -0.98% (S&P 500 -1.27%, DJ Ind. -1.03%, Russel 2000 -1.70%, SOX Philadelphia Semiconductor Index -1.43%, BKX Philadelphia Bank Index -4.35%).

Market breadth on the NYSE and NASDAQ was weak, with NYSE Advancing Issues/Declining Issues at 0.37 and Advancing Volume/Declining Volume at 0.24 (NYSE TRIN / Arms Index at 1.55), and NASDAQ Advancing Issues/Declining Issues at 0.39 and NASDAQ Advancing Volume/Declining Volume at 0.28 (NASDAQ TRIN at 1.37). NYSE Declining Volume accounted for 80.63% of NYSE volume.

____________

Notably on Tuesday’s session were the facts that

• Setup S1: the ES (E-MINI S&P 500) left an unfilled opening gap on the downside (intraday high < previous session’s close),
• Setup S2: the next session (on Wednesday) will be an FOMC announcement day (2:15pm CET),
• Setup S3: the ES (E-MINI S&P 500) closed lower on an pre-FOMC announcement day,
• Setup S4: new 52-week lows did NOT expand neither on the NYSE nor on the NASDAQ despite a significantly lower intraday low (< -1.5%) for both indices,
• Setup S5: the SOX Philadelphia Semiconductor Index closed lower the 5th day in a row.

I therefore checked -as always from a historical and statistical perspective- for the market’s performance on the then following session(s) after those setups listed above had been triggered in the past. Table I shows the ES (E-MINI S&P 500) performance (since 01/01/1990) on the next session (in this event Wednesday, August 12) immediately following those sessions where setups S1 to S5 listed above had been triggered in the past.

All setups are agreeing concerning their positive bias on the then following session, with an associated t-score close to or partly significantly above (setups S2 and S3) the +1.645 mark in order to achieve statistical significance (means there is a low probability only that the ES’ above-average performance on a session after the respective setups had been triggered on close of the previous trading day in comparison to the at-any-time/average market’s performance and the positive performance at all occured by chance only).

Table II shows the ES (E-MINI S&P 500) intraday performance (since 01/02/1990) concerning the open, high, low and close (compared to the previous’s session close) on those sessions (in this event Wednesday, August 12) where setup S2 (‘the ES (E-MINI S&P 500) closed lower, and the next session will be an FOMC announcement day‘) had been triggered on close of the previous trading day (means on an FOMC announcement day where the ES E-MINI S&P 500 closed lower the session before).

Table III now shows the ES (E-MINI S&P 500) intraday performance (since 01/02/1990) concerning the higher high, the lower low (both compared to the previous’s session intraday high and low respectively), the first hour of the session and the last hour of the session on those sessions (in this event Wednesday, August 12) where setup S2 (‘the ES (E-MINI S&P 500) closed lower, and the next session will be an FOMC announcement day‘) had been triggered on close of the previous trading day.

With respect to intraday stats (open/high/low/close/close vs. open/) on those sessions (in this event Wednesday, August 12) where setup S3 had been triggered on close of the previous trading day (means on an FOMC announcement day where the ES E-MINI S&P 500 closed lower the session before), it is especially remarkable that the ES (E-MINI S&P 500)

• opened up on 9 out of the last 11 and on 20 out of the last 25 occurrences,
• left an unfilled gap on the downside (means the ES E-MINI S&P 500 posted an intraday high below the previous session’s close) on only 3 out of 63 occurrences,
• posted an intraday high of at least +1.0% on the last 9 occurrences,
• closed higher on 10 out of the last 11 occurrences, and closed above the open on 10 out of the last 11 occurrences as well,
• the Dow Jones Industrial never posted a loss of more than -0.38% (on 63 occurrences) during the first hour of the session (and probably the ES E-MINI S&P 500 as well due to the high correlation between both indices, see my comment on top of the page),
• shows a t-score at least close to, but regularly significantly above the +1.645 mark (in order to achieve statistical significance) on the intraday high, intraday low, close, close versus open and the first hour of the session in comparison to the respective ES’ (E-MINI S&P 500) at-any-time performance, but a alightly negative t-score on the last hour of the session.

To make a long story short: The period between the close of the session immediately preceding the FOMC announcement day (Tuesday’s close) and the start into the final hour of the FOMC announcement day’s session (Wednesday) is regularly a bullish period for the market, but even more bullish in the event the FOMC announcement day follows a session with a lower close for the ES (E-MINI S&P 500), while the final hour of the FOMC announcement day’s session shows regularly a mixed performance at best.

For those interested in the FOMC meeting calendar and respective statements:
Federal Open Market Committee (2004-2010) and here Federal Open Market Committee (2003 and older).

________________________________

Bottom line:

From my perspective the outlook concerning the ES’ (E-MINI S&P 500) performance on Wedneday, August 12 is positive at least until 2:15pm CET (FOMC announcement), but we shouldn’t rule out the possibility that the market could give back some or all of it’s potential intraday gains (if any) during the final hour of Wednesday’s session.

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

On Friday’s session the market complied to the slightly positive tendency based on those setups which were triggered on Thursday’s close (see my posting Trading the Odds on Friday – July 31, 2009).

But again market internals provided a reliable indication that the ES’ (E-MINI S&P 500) gain -up +0.84% at time of ‘twittering’- was on shaky grounds and that the then current NYSE TRIN above 1.5 would at least put a cap on any additional gains, but more likely the market would gave back some or all of it’s gains into the close (Twitter Updates at 01:53pm CET and 02:01pm CET: ‘With a NYSE TRIN currently above 1.5, in 2009 the $ES_F closed lower on 32 and higher on 4 occurrences only (max. gain +0.74%)‘ and ‘With a NYSE TRIN still above 1.5, in 2009 the $ES_F went down on 30 out of 37 occurrences during the final hour of the session.‘).

On Friday’s session the ES (E-MINI S&P 500) opened almost unchanged (-0.05%), posted an intraday low of -0.28% below Thursday’s close, posted an intraday high of +0.84% above Thursday’s close, and finally closed modestly higher +0.23% on the day, while the Nasdaq 100 closed lower -0.40% (S&P 500 +0.07%, DJ Ind. +0.19%, Russel 2000 -0.20%, SOX +0.23%, BKX +1.13%).

Market breadth on the NYSE was relatively strong despite a modestly higher close for the ES (E-MINI S&P 500) only, with NYSE Advancing Issues/Declining Issues at 1.66 and Advancing Volume/Declining Volume at 2.14 (NYSE TRIN / Arms Index at 0.78), while market breadth on the NASDAW was relatively weak, with NASDAQ Advancing Issues/Declining Issues at 0.92 and NASDAQ Advancing Volume/Declining Volume at 0.87 (NASDAQ TRIN at 1.05). NYSE Advancing Volume accounted for 67.44% of NYSE volume.

____________

Friday’s session did not leave many setups to lean on short-term. Notably were the facts that

• the ES (E-MINI S&P 500) closed up, but couldn’t manage a gain of more than +0.25% despite NYSE Advancing Volume/Declining Volume > 2,
• the VIX (CBOE Volatility Index) gained more than +2.0% despite a higher close for the ES (E-MINI S&P 500) -both are regularly negatively correlated-, and on top of that on a session before a regular or long weekend where the VIX regularly closes lower,
• the ES (E-MINI S&P 500) closed up, but went lower during the final hour of the session two days in a row,
• the $BKX Banking Index didn’t post a lower close for the 8th consecutive session now,
• the ES (E-MINI S&P 500) under-performed the $BKX Banking Index on the 5th consecutive session.

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I therefore checked -as always from a historical and statistical perspective- for the market’s performance on the then following session(s) after those setups listed below had been triggered in the past:

• Setup S1: the ES (E-MINI S&P 500) closed up, but couldn’t manage a gain of more than +0.25% despite NYSE Advancing Volume/Declining Volume > 2,
• Setup S2: the VIX (CBOE Volatility Index) closed up more than +2.0% despite a higher close for the ES (E-MINI S&P 500) on a session before a regular or long weekend,
• Setup S3: the ES (E-MINI S&P 500) closed up, but went lower during the final hour of the session two days in a row,
• Setup S4: the $BKX Banking Index didn’t post a lower close on eigth consecutive sessions,
• Setup S5: the ES (E-MINI S&P 500) under-performed the $BKX Banking Index on five consecutive sessions,
• Setup S6: any of Setups S1 to S5 had been triggered (S1 OR S2 OR … OR S5).

Table I (click on the link below, the stats table doesn’t fit into the blog’s body) shows the ES (E-MINI S&P 500) performance (since 01/02/1990) on the next session (in this event Monday, August 3) immediately following those sessions where setups S1 to S6 listed above had been triggered in the past.

http://www.tradingtheodds.com/stats/2009-07-31-ES-S1-S6.png

Although at first glance setups S5 to S5 show mixed results concerning their tendency on the then following session, setup S6 (‘any of Setups S1 to S5 had been triggered (S1 OR S2 OR … OR S5) ‘) indicates an overall negative tendency (below-average profit factor and negative t-score), first and foremost negatively skewed by setup S2 (VIX up and SPX up before a regular or long weekend) which shows the only statistically significant (negative) deviation from at-any-time probabilities and odds.

Table II now shows the ES (E-MINI S&P 500) intraday performance (since 01/01/2009) concerning the open, high, low, close (compared to the previous’s session close) and close versus open on those sessions (in this event Monday, August 3) immediately following those 38 sessions where setup S2 had been triggered (‘the VIX (CBOE Volatility Index) closed up despite a higher close for the ES (E-MINI S&P 500) on a session before a regular or long weekend‘) in the past.

With respect to intraday stats (open/high/low/close/close vs. open/) concerning those sessions where setup S2 (‘the VIX (CBOE Volatility Index) closed up despite a higher close for the ES (E-MINI S&P 500) on a session before a regular or long weekend‘) had been triggered on close of the previous trading day, it is especially remarkable that the ES (E-MINI S&P 500)

• shows a significant tendency for leaving an unfilled opening gap on the downside (on 12 out of 38 occurrences) on the then following session, and consequentially a significantly below-average profit factor on the intraday high (sum of all percentage-wise intraday highs divided by the sum of all percentage-wise intraday losses, for statistical purposes only in order to validate and demonstrate upside potential on the intraday high),
• shows a significantly above-average tendency for a lower close (on 25 out of the last 38 occurrences), and a profit factor on the close close to zero (only 4 out of 38 occurrences with a gain of more than +0.50% on the close, max. gain +1.30%), which applies -to a slightly lesser extent- to the probabilities and odds concerning the close versus open as well, and
• shows a t-score on the high/low/close/close versus open/ exceeding the -1.645 mark on the downside for statistical significance (probabilities are very low that the significantly below-average performance occured by chance only).

________________________________

Bottom line:

We’re currently experiencing some kind of abnormal market conditions (means more than a couple of setups triggered recently were triggered only on a handful of occurrences since 01/02/1990, sometimes never before since 01/02/1990, and the market regularly rejected to go down when is was supposed to do so due to historical probabilities and odds which were sometimes significantly lopsided to the downside, and last but not least the market completely reversed it’s short-term mean reversion tendency lately), so probabilities and odds have -for the time being- to be taken with a pinch of salt (and at least positions sizing should be adjusted accordingly).

Under normal market conditions, and based on the respective probabilities and odds concerning those setups which were triggered on Friday’s close, the outlook concerning the ES’ (E-MINI S&P 500) performance on the next session (in this event Monday, August 3) is negative, and although the market recently refused to go down when it was supposed to do so, at least upside potential will probably more than limited. On Monday’s session (and with respect to setup S2 for Monday’s session only) the edge will therefore probably be on the downside, and I’ll looking for an opportunity on the short side of the market in the event of any strength before, on or right after the open (Asian market’s on Monday morning might provide an additional indication).

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 (but long volatility).

The market’s recent ability to recoup almost all of it’s intraday losses during the second half of the session after a regularly relatively weak open (four consecutive sessions with a lower open) on the last couple of sessions provided a reliable indication that the edge on Thursday’s session would be on the long side of the market (see my posting Trading the Odds on Thursday – July 30, 2009), and the market fully complied to the respective probabilities and odds concerning those setups which were triggered on Thursday’s close.

In addition the eye-catching divergence between price and (continuously deteriorating) breadth -the ES (E-MINI S&P 500) posted an intraday gain of more than +1.75% while NYSE Advancing/Decling Issues rapidly deteriorated from above 6 to around 2.4 only, with a NYSE TRIN then above 2- provided an excellent opportunity (high odds / low risk) on the short side of the market as well (see my Twitter Updates during the second half of the session). Since 01/02/1990 (my data history) the ES (E-MINI S&P 500) never posted a gain of in excess of +1.0% on the close with a NYSE TRIN reading above 1.75, and there was only one occurrence where the ES (E-MINI S&P 500) posted a gain of in excess of +1.0% with a NYSE TRIN reading above 1.5.

On Thursday’s session the ES (E-MINI S&P 500) gapped higher +0.90% on the open, posted an intraday low of +0.64% below Wednesday’s close (and left an unfilled gap on the upside, with Thursday’s low +0.62% above Wednesday’s high), posted an intraday high of +1.95% above Wednesday’s close, but gave back the greater part of it’s intraday gains and finally closed higher +0.74% (only) on the day (almost at the low), while the Nasdaq 100 closed higher +0.64% (S&P 500 +1.19%, DJ Ind. +0.92%, Russel 2000 +1.72%, SOX +0.13%, BKX +3.41%).

Market breadth on the NYSE was (relatively) strong (except NYSE and NASDAQ TRIN), with NYSE Advancing Issues/Declining Issues at 3.69 and Advancing Volume/Declining Volume at 2.34 (NYSE TRIN / Arms Index at 1.58), and NASDAQ Advancing Issues/Declining Issues at 2.20 and NASDAQ Advancing Volume/Declining Volume at 1.92 (NASDAQ TRIN at 1.15). NYSE Advancing Volume accounted for 69.65% of NYSE volume.

____________

Notably on Thursday’s session were the facts that

• the ES (E-MINI S&P 500) left an unfilled gap on the upside (intraday low < previous session’s high) of +0.62%,
• the ES (E-MINI S&P 500) gave back more than 1.0% of it’s intraday gains,
• the ES (E-MINI S&P 500) closed below the open,
• the ES (E-MINI S&P 500) closed in the lower quartile of it’s daily trading range,
• the Dow Jones Industrial lost more than -0.50% during the final hour of the session (below it’s respective quotation at 03:00pm CET) for the first time during at least the last 10 trading days,
• the $BKX Banking Index didn’t post a lower close for the 7th consecutive session now,
• the ES (E-MINI S&P 500) under-performed the $BKX Banking Index on the 4th consecutive session,
• the ES (E-MINI S&P 500) posted a gain on the close despite a NYSE TRIN above 1.5 in regularly significantly negative territory (which apllies -to a lesser extent- to the Nasdaq 100 as well).

xx

I therefore checked -as always from a historical and statistical perspective- for the market’s performance on the then following session(s) after those setups listed below had been triggered in the past:

• Setup S1: the ES (E-MINI S&P 500) left an unfilled gap on the upside (intraday low < previous session’s high) of > 0.50%,
• Setup S2: the ES (E-MINI S&P 500) closed up, but gave back more than 1.0% of it’s intraday gains and closed in the lower quartile of it’s daily trading range,
• Setup S3: the ES (E-MINI S&P 500) posted a gain on the close despite a NYSE TRIN above 1.5 in regularly significantly negative territory,
• Setup S4: the ES (E-MINI S&P 500) posted a gain on the close of more than +0.50% despite a NASDAQ TRIN above 1 in regularly negative territory,
• Setup S5: the $BKX Banking Index didn’t post a lower close on seven consecutive sessions,
• Setup S6: the ES (E-MINI S&P 500) under-performed the $BKX Banking Index on four consecutive sessions,
• Setup S7: the Dow Jones Industrial lost more than -0.50% during the final hour of the session (below it’s respective quotation at 03:00pm CET),
• Setup S8: the next session will be on a Friday,
• Setup S9: any of Setups S1 to S7 had been triggered (S1 OR S2 OR … OR S7).

Table I (click on the link below, the stats table doesn’t fit into the blog’s body) shows the ES (E-MINI S&P 500) performance (since 01/02/1990) on the next session (in this event Friday, July 31) immediately following those sessions where setups S1 to S9 listed above had been triggered in the past.

http://www.tradingtheodds.com/stats/2009-07-30-ES-S1-S9.png

With respect to the next session (in this event Friday, July 31), long term almost all of those setups listed above (except setup S5) are agreeing concerning their (slightly) negative bias on the then following session. BUT despite long-term probabilities and odds which are tilt in favor of a negative tendeny, the ES (E-MINI S&P 500) showed a -deviating- positive tendency on the then following session on those occurrences which were triggered in recent month.

Table II now shows the ES (E-MINI S&P 500) intraday performance (since 01/01/2009) concerning the open, high, low, close (compared to the previous’s session close) and close versus open on those sessions (in this event Friday, July 31) immediately following those 55 sessions (since 01/01/2009) where setup S9 had been triggered (‘any of Setups S1 to S8 had been triggered (S1 OR S2 OR … OR S8) ‘), representing the recent ‘overall‘ ( including best case / worst case) bullish or bearish tendency on the then following session after any of those setups listed above had been triggered on close of the previous trading day.

With respect to intraday stats (open/high/low/close/close vs. open/) concerning those sessions where setup S9 (‘any of Setups S1 to S8 had been triggered (S1 OR S2 OR … OR S8)‘) had been triggered on close of the previous trading day, it is notably that the ES (E-MINI S&P 500) showed an above-average tendency for a higher close (on 32 out of the last 55 occurrences) the next day (with a slightly above-average profit factor on the open/high/low/close as well), although upside potential will probably be limited (the ES (E-MINI S&P 500 never closed up more than +1.0% on the last 14 occurrences).

________________________________

Bottom line:

We’re currently experiencing some kind of abnormal market conditions (means more than a couple of setups triggered recently were triggered only on a handful of occurrences since 01/02/1990, sometimes never before since 01/02/1990, and the market regularly rejected to go down when is was supposed to do so due to historical probabilities and odds which were sometimes significantly lopsided to the downside, and last but not least the market completely reversed it’s short-term mean reversion tendency lately), so probabilities and odds have -for the time being- to be taken with a pinch of salt (and at least positions sizing should be adjusted accordingly).

Under normal market conditions, and based on the respective probabilities and odds concerning those setups which were triggered on Thursday’s close, the outlook concerning the ES’ (E-MINI S&P 500) performance on the next session (in this event Friday, July 31) is slightly positive.

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 (but short volatility).

The markets ability to recoup the greater part of it’s intraday losses and to close near or at the intraday high becomes a regular pattern these days. Wednesday’s session marked the

• fivth session in a row where the ES (E-MINI S&P 500) recouped at least 1.0% of it’s intraday losses into the close,
• the fourth session in a row where the ES (E-MINI S&P 500) closed in the top quartile of it’s daily trading range,
• the sixth session in a row where the ES (E-MINI S&P 500) closed above the open, and
• the fourth session in a row where the Dow Jones Industrial closed up during the final hour of the session (above it’s respective quotation at 03:00pm CET).

The ES (E-MINI S&P 500) opened lower -0.61%, posted an intraday low of -1.10% below Tuesday’s close, but again reversed course during the second half of the session and posted an intraday high of -0.08% below Tuesday’s close (and therefore left an unfilled opening gap on the downside the second day in a row), and finally closed modestly lower -0.10% on the day, while the Nasdaq 100 closed lower -0.37% on the day (S&P 500 -0.46%, DJ Ind. -0.29%, Russel 2000 -0.65%, SOX -0.86%, BKX +0.39%).

Market breadth on the NYSE was mixed, with NYSE Advancing Issues/Declining Issues at 0.67 and Advancing Volume/Declining Volume at 0.87 (NYSE TRIN / Arms Index at 0.78), and NASDAQ Advancing Issues/Declining Issues at 0.61 and NASDAQ Advancing Volume/Declining Volume at 0.61 (NASDAQ TRIN at 1.10). NYSE Advancing Volume accounted for 46.12% of NYSE volume.

____________

Besides the market’s recent late-day strength (as noted and listed above), notably on Wednesday’s session were the facts that

• the ES (E-MINI S&P 500) left an unfilled opening gap on the downside (intraday high < previous session’s close) a second day in a row,
• the ES (E-MINI S&P 500) opened lower (than the previous session’s close) on the 4th consecutive session,
• the $BKX Banking Index didn’t post a lower close for the 6th consecutive session now,
• the ES (E-MINI S&P 500) under-performed the $BKX Banking Index on the 2nd consecutive session,
• the VIX (CBOE Volatility Index) posted a higher open, a higher high, a higher low and a higher close on the 3rd consecutive session.

xx

I therefore checked -as always from a historical and statistical perspective- for the market’s performance on the then following session(s) after those setups listed below had been triggered in the past:

• Setup S1: the ES (E-MINI S&P 500) left an unfilled opening gap on the downside (intraday high < previous session’s close) on two consecutive sessions,
• Setup S2: the ES (E-MINI S&P 500) opened lower (than the previous session’s close) on four consecutive sessions,
• Setup S3: the ES (E-MINI S&P 500) closed above the open on six consecutive sessions,
• Setup S4: the ES (E-MINI S&P 500) recouped at least 1.0% of it’s intraday losses on five consecutive sessions,
• Setup S5: the ES (E-MINI S&P 500) closed in the top quartile of it’s daily trading range on four consecutive sessions,
• Setup S6:the Dow Jones Industrial closed up during the final hour of the session (above it’s respective quotation at 03:00pm CET) on four consecutive sessions,
• Setup S7: the $BKX Banking Index didn’t post a lower close on six consecutive sessions,
• Setup S8: the ES (E-MINI S&P 500) under-performed the $BKX Banking Index on two consecutive sessions,
• Setup S9: the VIX (CBOE Volatility Index) posted a higher open, a higher high, a higher low and a higher close on three consecutive sessions,
• Setup S10: any of Setups S1 to S7 had been triggered (S1 OR S2 OR … OR S7).

Table I (click on the link below, the stats table doesn’t fit into the blog’s body) shows the ES (E-MINI S&P 500) performance (since 01/02/1990) on the next session (in this event Thursday, July 30) immediately following those sessions where setups S1 to S10 listed above had been triggered in the past.

http://www.tradingtheodds.com/stats/2009-07-29-ES-S1-S10.png

With respect to the next session (in this event Thursday, July 29), almost all of those setups listed above (except setup S4) are agreeing concerning their positive bias on the then following session. Especially setups S1 and S6 (S1: reiterated weakness on the open, S6: repeatedly strength during the final hour of the session) show a remarkable above-average probability and odds for a positive tendency the next day.

Table II now shows the ES (E-MINI S&P 500) intraday performance (since 01/01/2009) concerning the open, high, low, close (compared to the previous’s session close) and close versus open on those sessions (in this event Thursday, July 30) immediately following those 72 sessions where setup S1 had been triggered (‘the ES (E-MINI S&P 500) left an unfilled opening gap on the downside (intraday high < previous session’s close) on two consecutive sessions‘).

With respect to the intraday stats (open/high/low/close/close vs. open/) concerning those sessions where setup S1 (in this event Thursday, July 29) had been triggered on close of the previous trading day, it is especially remarkable that the ES (E-MINI S&P 500)

• shows a significantly above-average tendency for a higher open (on 53 out of 72 occurrences),
• almost always posted a high above the previous session’s close (only 2 sessions out of 72 occurrences with an unfilled gap on the downside, and a t-score above 1.645 as a reliable indication that chances that returns are above-average occurred by chance only are very low), and
• shows a significantly above-average tendency not only for a higher close, but for limited downside potential even on a lower close (and again a t-score above 1.645 as a reliable indication that chances that returns are above-average occurred by chance only are very low).

________________________________

Bottom line:

We’re currently experiencing some kind of abnormal market conditions (means more than a couple of setups triggered recently were triggered only on a handful of occurrences since 01/02/1990, sometimes never before since 01/02/1990, and the market regularly rejected to go down when is was supposed to do so due to historical probabilities and odds which were sometimes significantly lopsided to the downside, and last but not least the market completely reversed it’s short-term mean reversion tendency lately), so probabilities and odds have -for the time being- to be taken with a pinch of salt (and at least positions sizing should be adjusted accordingly).

Under normal market conditions, and based on the respective probabilities and odds concerning those setups which were triggered on Wednesday’s close, the outlook concerning the ES’ (E-MINI S&P 500) performance on the next session (in this event Thursday, July 30) is positive.

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 (but short volatility and otherwise positioned on the long side of the market).

When almost all major Asian market indices closed higher on Monday’s session again (as it was already the case on Thursday’s and Friday’s session), probabilities and odds were again (the third day in a row) tilt in favor of a positive bias for the US major market indices.

In the past when Japan’s Nikkei 225, Hong Kong’s Hang Seng Index, Australia’s ASX All Ordinaries Index and Korea’s Composite Stock Price (KOSPI) Index closed up on the day, the ES (E-MINI S&P 500) showed a significantly above-average positive tendency on the close, and to an even more significant extent a tendency to take out the previous session’s intraday high and to NOT undercut the previous low for an at least limited downside potential (see the respective t-score on the stats which far exceeds the necessary 1.645 mark in order to be regarded as statistically significant).

The ES (E-MINI S&P 500) opened modestly lower -0.26% , posted an intraday low of -0.89% below Friday’s close, but again reversed course during the second half of the session and closed higher +0.23% on the day (right on the intraday high), while the Nasdaq 100 closed -with a gain of +0.02%- almost unchanged (S&P 500 +0.30%, DJ Ind. +0.17%, Russel 2000 +0.44%, SOX +0.58%, BKX +3.11%).

Market breadth on the NYSE was relatively strong, with NYSE Advancing Issues/Declining Issues at 1.83 and Advancing Volume/Declining Volume at 1.74 (NYSE TRIN / Arms Index at 1.05), and NASDAQ Advancing Issues/Declining Issues at 1.34 and NASDAQ Advancing Volume/Declining Volume at 1.71 (NASDAQ TRIN at 0.78). NYSE Advancing Volume accounted for 62.66% of NYSE volume. Speculative interest was running high again, with Nasdaq Volume / NYSE Volume at 207.64%, the fourth consecutive reading above 200% on the close (the first occurrence since 01/02/1990).

____________

Notably on Monday’s session were the facts that

• the ES (E-MINI S&P 500) posted a higher low (than the previous session’s low) on the 11th consecutive session,
• the ES (E-MINI S&P 500) posted a higher high (than the previous session’s high) on the 6th consecutive session,
• the ES (E-MINI S&P 500) closed above the previous session’s high on the 3rd consecutive session,
• the ES (E-MINI S&P 500) closed above the open on the 4th consecutive session,
• the ES (E-MINI S&P 500) couldn’t manage a gain of more than +0.25% despite relatively strong market breadth and despite a strong Banking Index which posted a gain of more than +3.0%,
• the ES (E-MINI S&P 500) under-performed the S&P 500 Equal Weighted Index ($SPXEW) by at least -0.25% the fourth day in a row,
• speculative interest was again running very high, with Nasdaq Volume / NYSE Volume at 207.64%, the fourth consecutive reading of > 200% on the close (the first occurrence since 01/02/1990),
• the VIX posted a gain of more than +5.0% despite a positive close for the S&P 500 (both are regularly negatively correlated).

xx

I therefore checked -as always from a historical and statistical perspective- for the market’s performance on the then following session(s) after those setups listed below had been triggered in the past:

• Setup S1: the ES (E-MINI S&P 500) posted a higher low (than the previous session’s low) on eleven consecutive sessions,
• Setup S2: the ES (E-MINI S&P 500) posted a higher high (than the previous session’s high) on six consecutive sessions,
• Setup S3: the ES (E-MINI S&P 500) posted a higher low and a higher high on six consecutive sessions,
• Setup S4: the ES (E-MINI S&P 500) closed above the previous session’s high on three consecutive sessions,
• Setup S5: the ES (E-MINI S&P 500) closed above the open on four consecutive sessions,
• Setup S6: the ES (E-MINI S&P 500) posted a higher low and a higher high, closed above the open and above the previous session’s high on three consecutive sessions,
• Setup S7: the ES (E-MINI S&P 500) couldn’t manage a gain of more than +0.25% despite NYSE Advancing Issues/Declining Issues and NYSE Advancing Issues/Declining Volume > 1.70,
• Setup S8: the ES (E-MINI S&P 500) couldn’t manage a gain of more than +0.25% on a session where the Banking Index posted a gain of more than +3.0%,
• Setup S9: the ES (E-MINI S&P 500) under-performed the S&P 500 Equal Weighted Index ($SPXEW) by at least -0.25% on four consecutive sessions,
• Setup S10: Nasdaq Volume / NYSE Volume > 175% on four consecutive sessions,
• Setup S11: the VIX posted a gain of more than +5.0% despite a positive S&P 500, and the weekday is Monday (due to the fact that chances that the VIX will close up on a Monday are already better than 2:1),
• Setup S12: any of Setups S1 to S11 had been triggered (S1 OR S2 OR … OR S11).

Table I (click on the link below, the stats table doesn’t fit into the blog’s body) shows the ES (E-MINI S&P 500) performance (since 01/02/1990) on the next session (in this event Tuesday, July 28) immediately following those sessions where setups S1 to S12 listed above had been triggered in the past.

http://www.tradingtheodds.com/stats/2009-07-27-ES-S1-S12.png

With respect to the next session (in this event Tuesday, July 28), none of those setups listed above show a significant edge on the long or short side of the market. The same conclusion applies to intraday stats (open/high/low/close/close vs. open) concerning those session in 2009 where setup S12 (‘any of Setups S1 to S11 had been triggered (S1 OR S2 OR … OR S11)‘) had been triggered, although the setup shows a significant (better than at-any-time probabilities and odds) tendency that the ES (E-MINI S&P 500) will probably take out the previous (Monday’s) session’s intraday high (chances are 2:1) and will probably NOT post a low below the previous session’s (Monday’s) low (chances are again 2:1) for an at least limited downside potential.

________________________________

Bottom line:

We’re currently experiencing some kind of abnormal market conditions (means more than a couple of setups triggered recently were triggered only on a handful of occurrences since 01/02/1990, sometimes never before since 01/02/1990, and the market regularly rejected to go down when is was supposed to do so due to historical probabilities and odds which were sometimes significantly lopsided to the downside, and last but not least the market completely reversed it’s short-term mean reversion tendency lately), so probabilities and odds have -for the time being- to be taken with a pinch of salt (and at least positions sizing should be adjusted accordingly).

Under normal market conditions, and based on the respective probabilities and odds concerning those setups which were triggered on Monday’s close, the outlook concerning the ES’ (E-MINI S&P 500) performance on the next session (in this event Tuesday, July 28) is mixed, but downside potential will probably be limited.

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.