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.

Follow-up on Trading the Odds on Tuesday – May 19, 2009

The following is a follow-up on my previous post Trading the Odds on Tuesday – May 19, 2009.

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On Mondays’s session volume in NYSE advancing stocks accounted for more than 90% of NYSE total volume, for a so called ‘90% up(-side) day’ although NYSE Total Volume came in lower than the previous (Friday’s) session’s volume.

Due to the fact that this patterns regularly gets a lot of attention in the blogosphere, I thought it would be interesting to check if this pattern provides a potential short-term tradable edge or would confirm the conclusion of my provious post that we’ll probably get an intraday low at least -0.75% below Monday’s close.

Table I below shows the SPX‘ intraday performance (since 01/02/1990) concerning the open, high, low, close (compared to the previous’s session close) and close verus open on the next session (in this event Tuesday, May 19) immediately following those 13 instances where the ‘90% up(-side) session’ with NYSE Total Volume lower than the previous session’s volume setup had been triggered.

20090518-SPX-4

It is again -confirming the assessment regarding Tuesday’s potential intraday low- remarkable that this time in ALL of those 13 occurrences did the SPX post an intraday low on the next session which was at least -0.75% below the previous session’s close.

And again ALL intraday stats concerning the open, high, low, close and close versus open show a profit factor significantly below the respective at-any-time profit factor, which means going long the SPX on close of a session where the ‘90% up(-side) session’ with NYSE Total Volume lower than the previous session’s volume setup had been triggered would have been an unfavorable short-term setup concerning the next session, especially due to the fact the any upside potential on the close is limited as well (maximum end-of-day gain of 0.66%). So the ‘6 highs’ setup and NYSE volume setup are in total compliance to each other.

But please note that although we may see an intraday low at least -0.75% below Monday’s close at anytime during Tuesday’s session, all of those 13 ocurrences saw an intraday high above the previous session’s close as well, and sometimes even significantly above. So it not only might be possible that this time will be the first session when this signal failed (we’re always talking about probabilities, not certainties), but we might get an intraday high significantly above Monday’s close first before the SPX eventually (if at all) turns around (especially due to the fact that SPX futures are  already up +0.60% at time of writing).

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Successful trading,

Frank

P.s.: WordPress recently implemented a Twitter widget, so 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 BGZ (Daily Large Cap Bear 3x Shares) at time of writing.

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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.

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