There are some bullish forces kicking in the next few weeks. For one, the week after the 4th Friday in March has been a strong one over the last 24 years. (Not as much before that.) We can see this in the study below, which I showed in this weekend’s subscriber letter.
That is an encouraging looking curve and bullish stats. Traders may want to keep this in mind as they formulate their market bias this week.
In last night’s subscriber letter I showed a few studies suggesting the market was short-term overbought in a long-term downtrend, and that there appeared to be a short-term downside edge. Below is one of those studies, which also appeared in the Quantifinder yesterday afternoon.
Those are some powerful numbers. And only 1 instance did not post a lower close in the next 3 days. Below is a look at the 4-day profit curve.
Despite the recent bump up, that is a long, persistent downslope. Traders may want to consider this as they set their market bias.
Rob Hanna talks with Ali Pashaei about using options – mostly in the context of short-term directional trades. Ali also discusses his trading journey, his Options In Practice site, and some more complex options ideas.
With tonight being the State of the Union Address I decided to take another look at an old study that examined SPX performance following past speeches. The data table below looks back to 1982. There were a few instances, such as 2001 and 2009 where the speech was not an official “State of the Union”, but was delivered under a different name. I have included those speeches in the results as well.
The stats do not suggest much of an edge. But the profit curves seem to tell a more interesting story. Here is the 5-day curve.
All the curves look something like this in that since the turn of the century the market has tumbled after these speeches rather than been inspired by them. I guess they just don’t write speeches like they used to.
On Thursday this week I will be hosting a Webcast with guest Ali Pashaei. You are invited to attend live and ask questions if you wish. I will also be recording and posting it up to the Quantifiable Edges YouTube channel.
I’ve known Ali for a long time. He is a professional options trader, and he also runs the Options In Practice website, where he works with traders on implementing options strategies.
Ali and I will be discussing the use of options for directional trades – primarily short-term directional trades. I’m often asked by new Quantifiable Edges subscribers about taking the trade ideas I post in the letter, or utilizing the QE Numbered Systems, and implementing an option strategy around them. Ali will be sharing insights as a professional options trader on some of his favorite approaches to take advantage of short-term directional edges. I’m really looking forward to our talk, and hope you’ll find some of the ideas beneficial as well.
So join me on Thursday at noon EST using the link below, or if you cannot make it, keep your eye out on Friday, when I will be posting it up to YouTube and the Quantifiable Edges blog.
The NDX was hit especially hard last week. It fell 4.5% on the week and Friday was the lowest close since October. Many times we will see multi-day pullbacks and/or intermediate-term lows during a long-term uptrend suggest the market is primed for a bounce. But in running some studies on NDX this weekend, I found results like below.
Such setups have been a tossup over the following days. SPX traders might find these results surprising. But SPX and NDX have exhibited somewhat different tendencies over the years. The SPX is more prone to mean reversion than the NDX. NDX tends to trend better. One example of this can be seen by looking at the same study using SPX.
These numbers are quite compelling. Of course, SPX is nowhere near its 2-month low. So this is not setting up.
I will note I am seeing some mild evidence that a bounce is likely in the next few days. But there could be more pain before it happens, as demonstrated by the NDX study and the fact that the SPX isn’t nearly as oversold.
I’ve posted and updated the “Twas 3 Nights Before Christmas” study on the blog here several times since 2008. The study will kick in at the close today (12/21). This year I will again show the Nasdaq version of the study. While all the major indices have performed well during this period, the Nasdaq Composite has some of the best stats.
The stats in this table are strong across the board. An average year posted a gain of about 2.4% over the next 8 days. The note at the bottom shows the reliability of a bounce at some point has been nothing short of incredible. Traders may want to keep this study in mind over the next several days.
Join Rob Hanna and founder Jeff Pietsch to learn about their work at Capital Advisors, 360, LLC. Understand how you can have your own separately managed account traded for you using many of the same models that Rob and Jeff use to trade their own money. Of course several of Rob’s models utilize concepts discussed here at Quantifiable Edges since 2008. During the webinar we’ll cover the following topics:
What are separately managed accounts, and what does it take to set one up?
Why do many people utilize them?
What are some of the models Rob Hanna manages, and how have they performed over the last few years?
What other kinds of models are available at Capital Advisors 360, outside of those Rob manages?
And we’ll save lots of time to answer your questions!
If you would like to register for the webinar, to make sure you receive a recording,you may do so here.
Today’s study is one of several that will be appearing in the Quantifiable Edges Subscriber Letter in a few hours. Quantifiable Edges Black Friday sale has been extended through Cyber-Monday. Act now to take advantage. After Monday – its gone.
Black Friday was a tough one for the market, with the major indices all closing down over 2%, and the VIX spiking over 10 points to close at 28.62.
Big drops on Fridays can be interesting. Both the Crash of ’29 and the Crash of ’87 happened on Monday. The Crash of ’87 is still remembered by some traders that are active today (though it is getting less and less each year). In 1987, there was a strong selloff on Friday and then all hell broke loose on Monday. But since then, strong Friday selloffs have commonly been followed by bounces in the following days. Perhaps this is due to the fact that fear of a crash causes what might otherwise be an ordinary selloff to become exaggerated and overdone on Fridays. Or perhaps it is just that people don’t want to hold over the weekend. Whatever the reason, the tendency to bounce has been strong. The study below is one I have showed for over 10 years. It defines a strong selloff as more than 1.5x the recent (20-day) average true range.
The numbers here are all very impressive and suggest a strong bullish bias. Below is a look at the 6-day profit curve.
The range over the last week has been very tight. Every SPY close in the 5 days since 11/16 has been within the intraday range of that 11/16/21 bar. It is said that consolidations are often resolved in the direction of the trend. This guideline suggests that we’re more likely to see another leg up from here than a breakdown. The study below tests this concept. It was last seen in the 11/15/19 letter and has been updated.
It certainly appears to confirm the old technical adage. Results favor the long side over the immediate 3-day period and they are even more impressive when looking out 8 to 10 days. I will also note that the last 12 instances, dating back to January of 2007, have all closed higher 3 days later.
Have a great Thanksgiving, and keep an eye out for the Quantifiable Edges Black Friday sale!
Note: Next week I will be having the annual “Black Friday” sale, which is the only sale I run during the year. If you think you might be interested in a subscription, then now might be a good time to take a free 1-week trial and see if Quantifiable Edges would be helpful for you.
The time around Thanksgiving has shown some strong tendencies – both bullish and bearish. I have discussed them a number of times over the years. In the updated table below I show SPX performance results based on the day of the week around Thanksgiving. The bottom row is the Monday of Thanksgiving week. The top row is the Monday after Thanksgiving.
Monday and Tuesday of Thanksgiving week do not show a strong, consistent edge. But the data for both Wednesday and Friday looks quite strong. Both of those days have seen the S&P 500 rise at least 70% of the time between 1960 – 2020. The average instance managed to gain about 0.3% for each of the 2 days. (This is shown in the Avg Profit/Loss column where $300 would equal a 0.3% gain.) That is a hearty 1-day move. Meanwhile, the Monday after Thanksgiving has given back a good chunk the gains that the previous 2 days accumulated. It has declined 66% of the time and the average Monday after Thanksgiving saw a net loss of 0.32%.
Date and time: Thursday 11/11/2021 at 4:15pm EST & Saturday 11/13/2021 at 11:00am EST
Duration: 30-40 minutes + Q&A
At Capital Advisors 360, I manage some composite portfolios that include several different models I have developed over the years. Using a couple of the models I trade as examples, I will share several of the factors I consider when determining what models are likely to work well together. I will look at factors such as correlation, exposure levels, drawdown timing, and more. Traders should be able to take away some ideas on how to determine whether their own strategies are complimentary, and what to look for when considering additional strategies for their portfolio.
If you would like to register for the webinar, to make sure you receive a recording, you may do so here.
Otherwise, you may use the link below to simply join the webinar at the set time:
The VIX posted its lowest close since the 2020 COVID Crash on Thursday. October is known for its volatility, so as you might expect, posting a low in implied volatility during October is somewhat unusual. Looking back to 1990, this is just the 6th time that has occurred. I’ve listed all of them below, along with forward SPX results. (Note, only the 1st instance is listed. Some years there were multiple instances, but I did not include repeats.)
Five instances is too few to draw solid conclusions. But I did find the results interesting. I noted that 4 of them occurred during the “lost decade” of 2000 – 2009, when stocks showed no gains over 10 years. Still, all of those instances were followed by gains between 2-12 months out. And so was the 2017 instance.
Friday saw the market bounce after several indices closing at multi-month lows on Thursday. Fridays are interesting in that they are the least likely day of the week for a selloff to end or a rally to begin. But when rallies do start on a Friday, they have shown the best odds of success of any day of the week. I’ve seen this a number of ways over the years. The study below is one simple way to look at it. It examines times the market closed up the day after closing at a 21-day low the day before. Results are broken down by day of the week, and also by holding period.
Looking out 10,15,20, and 25 days, Friday has the best stats of any day. And in most cases, none of the other days are even close. So if you are looking for an encouraging intermediate-term sign based on Friday’s action, this appears to be one.
