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.

Trading the Odds on Friday – April 24, 2009

The final hour on Thursday’s session made the respective forecast a hit again: ‘The setup (SPY opened lower -0.91%, but posted an intraday high of +1.50%) triggered on Thursday may provide a favorable short-term opportunity on the long side on Thursday’s session (e.g. on a lower open and/or any significantly intraday weakness).‘ (cit. from my post Trading the Odds on Thursday – April 23, 2009).

Due to the fact that I’m a bit short of time -and that no notable setup was triggered on Thursday’s session-, only one obervation: Although the Nasdaq closed up +0.65% on the day, it happened on a relatively weak breadth. Nasdaq Advancing Issues / Declining Issues closed at 0.63, way below what could have been expected from an up-day in the market. But at least with respect to the Nasdaq and by contrast to what one might expect from such a (negative) divergence, this is NOT necessarily a negative indication for the next session.

Since 10/01/2007 there were 6 occurrences when the Nasdaq closed up at least +0.65% on a day when the Nasdaq Advancing Issues / Declining Issues closed below 0.75 (declining issues outnumbered advancing issues). On 4 instances, the Nasdaq closed higher the next day, and lower on only 2 instances. Due to the way too small sample size this is nothing to read any statistically significant into it, but at least something to keep in mind and indicating that probabilities and odds are slightly tilt in favor of a higher close for the Nasdaq (and probably for the SPX as well).

But keep in mind that upside potential for the rest of the week will probably be limited due to the ‘SPY with at least 4 higher closes each on lower volume than on the previous session during the last 10 sessions.’ setup triggered on Friday last week with a negative outlook over the course of the then following 5 sessions (the SPY closed at 87.08 on last Friday).

Expect more to come concerning RSI(x) trading strategies (among others) over the weekend (see my previous post  Trading the RSI as a Static Strategy).

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 mentioned in this post at time of writing.

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Filed under: Daily Update

One Response

  1. Faraz says:

    just wanted to say i read your blog daily since there is no other like it on the internet. great work – we appreciate it.

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