Quantifiable Edges Big Time Swing System Stays Strong in 1st Half 2015

I’ve updated the Quantifiable Edges Big Time Swing System overview page with results through July 13th (when the most recent trade closed out). The system only averages about 1 trade per month, so I typically update the results bi-annually. The QE Big Time Swing System has been on a roll in 2015. It has had 6 trades. All six signals in 2015 have realized profits. The signals produced a net return of 9.87% for SPY (including dividends, commissions of $0.01/share, and an assumed interest rate on cash of 0.1%). The system also continues to make new equity highs.

The Big Time Swing System provides easy to follow mechanical rules. The standard parameters are not optimized, have never been changed, and have performed quite well (they are the ones used for all performance metrics). There are only about 11 trades per year averaging 7 trading days per trade. All entries and exits are either at the open or the close. And to be sure you have everything set up properly traders may follow the private purchasers-only blog that tracks all SPY signals and possible entry/exit levels. This service is free for 12 months from the date of purchase.

For system developers looking for a system that they can use as a base to build their own system from, the Big Time Swing is an attractive option. It is all open-coded and comes complete with a substantial amount of background historical research. And since it is only in the market about ¼ of the time, it can easily be combined with other systems to provide greater efficiency of capital. Once you’re ready to try and improve the system yourself you can also refer to the system manual or the August 2010 purchaser-only webinar – both of which discuss numerous ideas for customization.

For more information and to see the updated overview sheet, click here.

If you’d like additional information about the system, or have questions, you may email BigTimeSwing @ Quantifiable Edges.com (no spaces).

A 20% 1-Day Decline In VXO

Monday’s market rally was accompanied by a big drop in some implied volatility measures. The VXO, which is the old calculation for the VIX, saw a decline of over 22% on Monday. The study below is one I have shown before. It looks at SPX performance the day following VXO declines of 20% or more. Stats are all updated.

2015-07-14 image1

Numbers here seem to suggest a downside edge for Tuesday. Traders may want to keep this in mind today.

 

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SPX Performance After 2-Days Bounces From Lows Similar To Thurs-Fri

Friday was the 2nd day in a row that SPY put in an unfilled gap up (though Thursday ended with very small gains.) And while the move up on Friday was strong, it still was not strong enough to erase all of Wednesday’s losses. Wednesday was a big down day that left SPX at an intermediate-term low. The Quantifinder showed a study that examined other instances where SPX rebounded 2 days off a 20-day but failed to fully recover the losses of the previous day. I updated that study in this weekend’s Subscriber Letter and have included the stats table below.

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Instances are a bit low here, but the stats are quite compelling. I suggests a short-term bullish edge.

 

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I’ll Be Appearing on the TimingResearch Weekly Webshow Monday

I am excited to once again be able join host, friend, and fellow analyst Dave Landry (along with other guests) for TimingResearch’s weekly show on Monday.  Information about the show, along with links to sign up are below.  All shows are recorded, so if the time is not convenient for you, just register and you’ll receive the recording.

Click here to learn more and sign up!

Date and Time:
- Monday, July 6, 2015
- 1PM ET (10AM PT)

Guests:
- Rob Hanna of QuantifiableEdges.com
- Ken W. Chow of PacificTradingAcademy.com
- Doc Severson of TradingConceptsInc.com

Guest Host:
- Dave Landry of DaveLandry.com

Click here to learn more and sign up!

1st of Month by Month (Updated)

A few times over the years I have shared this study.  It breaks down the bullish “1st trading day of the month” tendency by month.  I thought it would be interesting to take another look at it today.  Below is an updated version of the study orginally shown here on July 1, 2009.

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July has continued to be the most reliable month in term of closing positive, but when looking at the size of the average gain, it comes in 3rd.  You also note that August remains the worst on both counts (though it is now net positive, whereas in 2009 it was net negative).

 

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How The Russell 2000 has Dominated the S&P 500 in Late June

Yesterday I published a study that showed the week after June opex has exhibited weakness in recent years. An astute newsletter subscriber suggested to me that this could be partially due to Russell rebalancing, which always happens at the end of June. His comments led me to wonder how the Russell 2000 might have performed versus the SPX during late June. The table below shows how the Russell 2000 has done versus the SPX from the close the Tuesday after June Opex (which would be today’s close) until the close on the last trading day of June.

2015-06-23 image1

For the last 14 years the Russell 2000 has outperformed the SPX during this late June period. The average outperformance was 1.52%. This would seem worth keeping in mind over the next week.

 

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This Week In June

The week after June opex is one that has struggled quite a bit in recent times. This can be seen in the table below, which shows full-week performance dating back to 1999 when the bearish inclination seemed to kick in.

2015-06-22 image1

As you can see, it has been quite a streak of bearishness. Thirteen out of sixteen years have closed down. So it would seem we may be entering a weak seasonal period.

But the edge hasn’t existed for that long. In fact, if you look back further, you’ll find periods where this week appeared to show a bullish tendency. For instance, between 1979-1989 it closed up every year. So it will be interesting to see if the current bearish tendency continues to play out in the coming years.

 

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Friday’s Unfilled Gap Down Completed This Short-Term Bearish Setup

Interesting about the action on Friday was that SPY posted an unfilled gap down, and this occurred immediately following an unfilled gap up the day before.  The study below was appeared in  the Quantifinder.  It examines 2-day moves like SPY has just encountered.

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Based on the numbers there appeared to be a moderate downside edge over the next couple of days. While I don’t always show it in the blog, I do always examine the profit curves of these studies, and I do always post the curves in the Subscriber Letter. With the stats borderling, I decided to include in the blog today as well. Below is the 2-day curve.

2015-06-15 image2

While the steepness has lessened some in recent times, there still appears to be a bearish suggestion. To me this study seems worth some consideration.

 

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How SPX Has Moved After Similar Drops & Consolidations

After the big down day last Tuesday the market has not done a lot. In fact, it has closed within the true range of that 1 bar every day for the last week. The bears failed to follow through on that selloff, but the bulls have not managed to move the SPX back out of the range either. This triggered the study below from the Quantifinder.

2015-06-03 image1

Over the last 26 ½ years or so the SPX has burst higher out of this “failed selloff” and consolidation on a consistent basis. But the implications are only bullish for a few short days. After that there does not appear to be a decided edge for either the bulls or the bears.

 

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SPX After Quick Drops From 50-day Highs

The study below is one I have shown here on the blog for a long time. It looks at relatively sharp selloffs from intermediate-term highs. It shows that there has been a strong tendency for situations like the current one to bounce. Results are updated.

2015-05-27 image1

The stats all suggest an upside edge over the next 1-5 days. Traders may want to keep this in mind the next few days.

 

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Andrew Swanscott Interviewed me at Better System Trader (and Quantocracy readers liked it!)

Need something to listen to on your Memorial Day weekend car trip?  Can’t bear to be without the markets for 3 days?  Check Andrew Swanscott’s interview with me at his great new site, Better System Trader.  It was published just a few days ago and joins a growing list of excellent podcasts that Andrew has done.

 

I was also honored to see the interview was voted one of the top Quantocracy links this week by Quantocracy readers.

http://quantocracy.com/new-feature-at-quantocracy-voting/

 

Of course if you follow @BetterSystemTrader, or @Quantocracy, or @AbnormalReturns you are probably already aware of the interview.  If not, you may want to follow them.

 

Enjoy the long weekend!

 

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Why Friday’s Quiet OpEx Could Mean Trouble This Week

Despite the options expiration, SPY volume came in at the lowest level of the week. When combined with the fact that the VIX also closed at a recent low it brought about a bearish study from the Quantifinder. Results below are all updated.

2015-05-18 image1

The low VIX typically suggests complacency. It also frequently occurs when the market is at a short-term high level as it is now. The low SPY volume may also suggest complacency. SPY volume tends to spike during times of fear and to be low when traders are more comfortable. This is partially due to SPY often acting as a hedge security. Traders are less inclined to hedge when they are comfortable with market conditions. In any case, while the instances are a little low, the results are suggestive of a downside edge for about a week.

 

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What Friday’s Big VXO Drop Could Mean For Monday

The VIX, which is a measure of options pricing and is often referred to as a “fear index” saw a 15% drop on Friday. Meanwhile, the VXO, which is the old measure of the VIX, declined nearly 22%. Such big declines often suggest short-term over-optimism on the part of traders and are followed by a dip the next day. This can be seen in the study below.

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Numbers here suggest a downside edge. Traders may want to keep this in mind today.

 

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Employment Day Action

One factor that will likely have a substantial impact on market movement on Friday is the reaction to the Employment Report. Employment days have done fairly well over the last few years but most of the gains are thanks to the overnight session. This can be seen in the 2 profit curves below.

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2015-05-09 image1

As you can see, the overnight has generated more than 9x the profits of the day. Day profits have been less reliable and more volatile. With the report just released it appears the typical gap higher is going to occur. Unfortunately, what happens between the open and the close is a lot more random.

 

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