Trading the Odds

A statistical approach to profit in the US equity markets, trading the markets like professional card counters are playing Blackjack or expert poker players are playing Poker.

Consecutive Market Up/Down Days and their Magnitude of Change

Consecutive Market Up/Down Days and their Magnitude of Change

Michael at MarketSci made an interesting post about The Speed at which the Market Rises and Falls.

I’d like to provide an additional view on the speed at which the market rises and falls on consecutive up and down days, differentiated between bearish and bullish periods in the market.

The table below shows – for the time frame since 01/03/2007 and for x (1 up to 6) consecutive up and down days- the number of occurrences , the average percentage end-of-day (EOD) change,  the average percentage change between the intraday high and the previous close and the average percentage change between the intraday low and the previous close (average daily range)  on the xth consecutive up/down day.

up-down-days-20090325

(click on image to enlarge)

How to read this table: using the column with 4 consecutive up days as an example: Since 01/03/2007, there were 16 occurrences with 4 consecutive up days in the S&P 500. The average end-of-day gain on the 4th up day (not the average end-of-day gain of those 4 up days) was +0.75%, the average high +1.01% above the previous session’s close and the average low -0.33% below the previous session’s close.

The table shows that

  • with every consecutive up day, the up-trend looses steam, average end-of-day and intraday gains are contracting/eroding,
  • by contrast on consecutive down days the (negative) magnitude of change -concerning both the average end-of-day loss and and the average intraday ow- accelerates with every additional down day in the market.

I wanted to check if these observations would be mirrored during bullish periods in the market. The table below shows – now for the time frame between 10/01/2003 and 12/29/2006 and for x (1 up to 6) consecutive up and down days as well- again the average percentage end-of-day (EOD) change,  the average percentage change between the intraday high and the previous close and the average percentage change between the intraday low and the previous close on the xth consecutive up/down day.

up-down-days-20090325-2

(click on image to enlarge)

The table shows that during the bull market between 10/01/2003 and 12/29/2006

  • average end-of-day and intraday gains/losses were almost completely homogeneous, inside consecutive up days down and downdays as well as cross-border between up days and their respective counterparts (down days);
  • the market shows a much higher volatility -twofold up to threefold- since 01/03/2007 (even on up days) then during the time frame between 10/01/2003 and 12/29/2006.

Successful trading
Frank

Advertisements

Filed under: Studies/Survey

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Twitter Updates

  • w/ 18.30 at time of writing, the gap between $VIX and $VSTOXX is close to its all time closing low of 19.90, posted on 10/16/2008. 1 year ago
  • The $VIX gained 48.33% over the course of the last week. Since 1/2/1990 there were 38 other occurences w/ $VIX gained > 48% over 5 sessions. 1 year ago
  • On Friday iShares MSCI Brazil Capped ( $EWZ ) closed at 19.09 , a 11+ year low and its lowest level since 11/08/2004. 1 year ago
  • On Friday the Russell 2000 Index ( $RUT ) closed at 1,046.20 , a 2+ year low and its lowest level since 10/09/2013. 1 year ago
  • @QuantStratTradR Sorry, I didn't follow the entire communication. Link to what ? // @easyvolatility 2 years ago

DISCLAIMER

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. Under no circumstances does this information represent an advice or recommendation to buy, sell or hold any security.

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, including the information that others post here.

While every effort will be made to provide complete, the most accurate and current information, none of the information on this site is guaranteed to be correct, and anything written here should be subject to independent verification. I make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to this blog or the information, analysis, statistics, or related graphics contained on the blog for any purpose.

I may or may not hold positions for myself, my family and/or clients in the securities mentioned here. Actions may have been taken before or after information is presented, and any opinions expressed in this site are subject to change without notice.

Please read the full ... DISCLAIMER

Calendar

March 2009
M T W T F S S
    Apr »
 1
2345678
9101112131415
16171819202122
23242526272829
3031  
%d bloggers like this: