This is a follow-up on my post Trading the Odds on Friday – April 17, 2009.
In my previous post I mentioned that we witnessed a very strong breadth (NYSE Advancing Issues/Declining Issues and the NYSE Advancing Volume/Declining Volume) during the last couple of sessions, but on Thursday -although a heavily lopsided breadth session with NYSE Advancing Issues/Declining Issues and the NYSE Advancing Volume/Declining Volume both greater than 3.5- the SPX by contrast posted a ‘relatively small end-of-day gain’ of +1.55% (‘only’).
Of course to mark a gain of +1.55% as ‘relatively small’ doesn’t sound overly modest, but you have to take such a gain into context.
Since 10/01/2007 there were 39 occurrences when the ratio of NYSE Advancing Issues/Declining Issues and NYSE Advancing Volume/Declining Volume both closed above 3.5. The following table shows the SPX‘ (S&P 500) behavior and the respective performance
- the day the signal was triggered (close -trigger day-),
- the session following the session on which the signal was triggered (close -next day-), and
- the performance (end-of-day change) three days later in comparison to the close on the trigger date.
Especially notable is the last column ‘on average’ due to the fact that
- on average, on the day the signal was triggered (NYSE Advancing Issues/Declining Issues and NYSE Advancing Volume/Declining Volume both closed above 3.5) the SPX gained +3.74% (compared to yesterday’s +1.55% gain ‘only’, which is one of the smallest gains on record concerning this setup since 10/01/2007),
- on average, the SPX posted an intraday low -1.70% below the trigger day’s close on the next session, while by contrast it posted an intraday high of -on average- +0.92% above the trigger day’s close on the next session.
- on average, the SPX closed lower -1.07% three days later.
To make a long story short: At least over the course of the next couple of sessions (1-3) upside potential will probably not only be limited, but the odds (potential payout and expectancy, NOT the true chances that the event -in this case the probabilities for a higher or lower close- will occur) are tilt in favor of the short side of the market.
| No. | Date | high | low | close (trigger day) |
close (next day) |
3 session(s) later |
| 1 | 04/09/2009 | +0,90% | -1,31% | +3,81% | +0,25% | -0,53% |
| 2 | 04/02/2009 | +0,97% | -0,92% | +2,87% | +0,97% | -2,26% |
| 3 | 03/23/2009 | +0,09% | -2,12% | +7,08% | -2,02% | +1,21% |
| 4 | 03/18/2009 | +1,12% | -1,58% | +2,09% | -1,30% | +3,60% |
| 5 | 03/17/2009 | +3,20% | -1,60% | +3,21% | +2,09% | -1,23% |
| 6 | 03/12/2009 | +1,01% | -1,10% | +4,07% | +0,77% | +3,65% |
| 7 | 03/10/2009 | +1,71% | -0,80% | +6,37% | +0,24% | +5,13% |
| 8 | 02/24/2009 | +0,90% | -2,62% | +4,01% | -1,07% | -4,92% |
| 9 | 02/06/2009 | +0,74% | -0,80% | +2,69% | +0,15% | -4,01% |
| 10 | 01/28/2009 | -0,59% | -3,43% | +3,36% | -3,31% | -5,57% |
| 11 | 01/21/2009 | -0,06% | -3,45% | +4,35% | -1,52% | -0,44% |
| 12 | 01/02/2009 | +0,52% | -1,32% | +3,16% | -0,47% | -2,70% |
| 13 | 12/31/2008 | +3,49% | -0,43% | +1,42% | +3,16% | +3,48% |
| 14 | 12/30/2008 | +2,21% | -0,11% | +2,44% | +1,42% | +4,13% |
| 15 | 12/16/2008 | +0,62% | -1,89% | +5,14% | -0,96% | -2,77% |
| 16 | 12/08/2008 | +0,72% | -2,67% | +3,84% | -2,31% | -3,97% |
| 17 | 11/26/2008 | +0,97% | -0,73% | +3,53% | +0,96% | -4,38% |
| 18 | 11/24/2008 | +2,01% | -1,97% | +6,47% | +0,66% | +5,22% |
| 19 | 11/04/2008 | -0,39% | -5,56% | +4,08% | -5,27% | -7,43% |
| 20 | 10/30/2008 | +3,17% | -1,00% | +2,58% | +1,54% | +5,41% |
| 21 | 10/28/2008 | +3,13% | -1,94% | +10,79% | -1,11% | +3,00% |
| 22 | 10/20/2008 | +0,00% | -3,34% | +4,77% | -3,08% | -7,84% |
| 23 | 10/13/2008 | +4,08% | -3,12% | +11,58% | -0,53% | -5,67% |
| 24 | 09/30/2008 | +0,06% | -2,19% | +5,42% | -0,45% | -5,76% |
| 25 | 09/19/2008 | +0,02% | -3,94% | +4,03% | -3,82% | -5,51% |
| 26 | 08/28/2008 | -0,24% | -1,38% | +1,48% | -1,37% | -1,98% |
| 27 | 06/05/2008 | -0,28% | -3,14% | +1,95% | -3,09% | -3,25% |
| 28 | 04/18/2008 | -0,01% | -0,80% | +1,81% | -0,16% | -0,75% |
| 29 | 04/16/2008 | +0,29% | -0,55% | +2,27% | +0,06% | +1,72% |
| 30 | 04/01/2008 | +0,57% | -0,63% | +3,59% | -0,19% | +0,02% |
| 31 | 03/24/2008 | +0,56% | -0,64% | +1,53% | +0,23% | -1,79% |
| 32 | 03/18/2008 | +0,81% | -2,43% | +4,24% | -2,43% | +1,44% |
| 33 | 03/11/2008 | +0,95% | -0,97% | +3,71% | -0,90% | -2,46% |
| 34 | 02/01/2008 | -0,00% | -1,13% | +1,22% | -1,05% | -4,94% |
| 35 | 01/28/2008 | +0,81% | -0,28% | +1,76% | +0,62% | +1,82% |
| 36 | 12/06/2007 | +0,20% | -0,31% | +1,50% | -0,18% | -1,97% |
| 37 | 11/28/2007 | +0,33% | -0,73% | +2,86% | +0,05% | +0,23% |
| 38 | 11/23/2007 | +0,37% | -2,40% | +1,69% | -2,32% | +1,97% |
| 39 | 11/13/2007 | +0,75% | -0,96% | +2,91% | -0,71% | -1,51% |
| on average: | +0,92% | -1,70% | +3,74% | -0,68% | -1,07% |
Successful trading,
Frank
P.s.: WordPress recently implemented a Twitter widget, so I’ll regularly make some intraday updates as well using Twitter (as I already did during the last couple of session, but unfortunately there seems to be a connectivity issue between WordPress and Twitter; hope that will be solved soon). If you’re interested in, please have a look at the blog during the trading session as well or subscribe directly to Twitter (recommended).
Disclosure: No positions in the securities montioned in this post at time of writing.
Filed under: Daily Update, Odds, Probability, S&P 500, SPY, Trading
