Highly Unusual Behavior Between SPX and VIX

Wednesday saw both SPX and VIX close at 40-day highs (about 2 months). Since they commonly trade opposite each other, to have them both be extended up like this is very rare. In fact, it has only happened 4 other times. Below is a list of those instances along with their 4-day results.

2018-01-18

The takeaway here is not that they all lost money over the next few days. Though that is notable, it would be dangerous to draw conclusions from just 4 instances. But I do think it is worth considering the fact there have only been 4 instances, and none since Y2K. The very low number of instances in itself demonstrates how unusual it is to have the SPX and the VIX pushing higher together. Current market conditions appear abnormal.

 

 

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January Opex A Weak Week

Opex week in January is one that the market has seen some struggles over the last 19 years. Below is the list of January op-ex weeks from 1999 – 2017 with their full week performance results. There have been 8 years in which January op-ex week occurred in conjunction with Martin Luther King Day. These were 4-day weeks and they are denoted with blue boxes around them.

2018-01-15

There has been a decided downside tendency during January opex week over the last 19 years. The run-up / drawdown stats are especially notable. Traders may want to keep this in mind this upcoming week.

 

 

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Quantifiable Edges Gold Subscriptions Continue To Shine

2017 was another strong year for the Quantifiable Edges Gold subscribers. The Gold subscription contains the Quantifiable Edges Subscriber Letter, which is published on a nightly basis. The Letter uses historical studies and quantitative evidence to evaluate the market and help traders establish both a short and intermediate-term trading bias. The Letter also shares trade ideas for trading index securities, large-cap stocks, VIX-based ETFs and occasionally other high-volume ETFs. The letter has been published for nearly 10 years (anniversary coming in February!), and the trade ideas have generated positive results every one of those years. The index trades were especially consistent in 2017, as 14 of them were initiated and published in 2017 and 13 of those closed out profitably. The full list of published trade ideas since the 2008 inception can be downloaded by anyone that takes a free 7-day trial.

Of course QE Gold subscriptions come with much more than just the letter. They include research, open coded systems, full archive access, educational videos, and annual subscribers even get free access to the Quantifiable Edges Market Timing Course.

I’d encourage all levels of traders to take a free look at a Quantifiable Edges subscription. And don’t hesitate to contact me with any questions as you determine whether a subscription could help you with your trading and investing.

 

Note: If you took a trial in the past, but would like another one, simply email support and we will set you up with one!

 

Below are some recent testimonials:

Rob,

  I am a re-subscriber who began following you years ago not too long after you started showing a public face (so to speak).  At that time, I was impressed with your whole approach to investing, and that remains true today.  After my early retirement a few years back, my wife and I begin travelling extensively and so my active trading became quite passive … we were often in places where the reliability of the grid was suspect (if it existed).  With the arrival of a first grandchild, we’re back in the modern world and I must say that I’m very much enjoying the morning read that comes from your hand.  Sane and sober advice is all too rare, and I really appreciate what you have to say.

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Rob,

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Alan – 12/20/17

A Down Day After A Persistent Upmove To New Highs

One compelling study from last night’s Quantifinder suggested the recent persistent upmove is unlikely to abruptly end. (This is a theme we have seen many times over the years.) It considers what happens after the market moves up at least 5 days in a row to a 50-day high, and then pulls back. I have updated the stats in the table below.

2018-01-11

We see here a decent edge that becomes stronger and more consistent as you look out over the next several days. The 9-10 day time frame shows exceptional stats. Traders may want to keep this in mind over the next few days.

 

 

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Historical Results Following 4 Up Days To Begin A New Year

The simple fact that the SPX posted a gain on the first 4 days of the year is a pretty rare occurrence, with 2018 only being the 9th instance since 1961. While instances have been low, the intermediate-term performance following such strong starts to the year has been impressive. And looking at most timeframes from 50 days to 250 (or more) days, the returns have been strong. Below is the list of instances and their 250-day returns, which is approximately 1 year.

2018-01-08

Not only were they all winners, but run-up has outsized drawdown in every instance. I noted the four instances above that were similar to 2018, since they were already making new 200-day highs when the setup triggered. While it is dangerous to read too much into just 8 instances, this may be worth keeping in the back of our minds. I will be interested to see if this year plays out like the rest.

 

 

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When A New Year Starts On A Positive Note

Last night’s subscriber letter featured (an expanded version of) the following study, which looks at performance in the 1st couple of days following a positive 1st day of a new year.

2018-01-03

The stats and curve all suggest some immediate follow-through has been typical. There have now been 9 winners in a row, with the last loser occurring in 1998.  Also notable is that 24 of the 26 instances (92%) closed higher than the entry price on either day 1 or day 2. Interestingly, the 2 instances that didn’t also didn’t manage to post a close above the entry price at any point during the rest of the month.

 

 

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Quantifiable Edges Big Time Swing System Posts Perfect Record for SPY Trades in 2017!

The Quantifiable Edges Big Time Swing System posted a perfect record in 2017! There were 9 SPY trades closed out during the year (8 long and 1 short), and they were all winners. I’ve updated the Quantifiable Edges Big Time Swing System overview page with results through 2017. The system only averages about 1 trade per month, so I do not update it all that often. The signals produced a net return of 8.44% for SPY (including dividends, commissions of $0.01/share, and an assumed interest rate on cash of 0.1%). And it only had exposure to the market during all or part of 18% of the trading days in 2017! While the winning % was especially strong, the fact that it posted gains overall was not a surprise. The QE Big Time Swing System has yet to post a losing year in SPY.

The system provides easy to follow mechanical rules, with no black box component. The standard parameters are not optimized, and have never been changed since the system’s release in 2009. There are only about 11 trades per year averaging 7 trading days per trade. To make it even easier, 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 SPY signals and possible entry/exit levels.

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.

The system has proven its worth since its release over eight years ago.  Don’t wait another year to determine if the QE Big Time Swing System is appropriate for you.  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 Not-so Merry VIX-mas Part 2

Yesterday I decided to examine performance of XIV during the last few days of the year. The thought was that we are now in a time period that is generally regarded as seasonally bullish. Additionally, volume and volatility are often light this week with many traders on vacation. So I thought with low volatility and bullish seasonality, it could be a bullish time for XIV (the inverse-VIX etf). I checked. Here is the table from yesterday…

2017-12-25

These numbers certainly do not look bullish. They could even be viewed as bearish. Even the lone “winner” saw XIV undergo a drawdown of nearly 11% before closing up $0.01.

So is there a bearish edge? One person suggested I also look at ZIV, which looks at medium-term volatility measures, rather than short-term.

2017-12-27-2

These results are also weak, but not nearly as bad as XIV. Let’s also consider how SPX has done.

2017-12-27-3

It has been a fairly tough time for SPX over the last few years. So XIV struggling during the same times is not a big surprise. If someone were to examine the last 6 years, they might believe there is a downside edge. I’m not terribly comfortable with such a small sample size. A look at a longer-term chart and stats for SPX might show why.

2017-12-27-5

It’s been a bad run the last few years. But suggesting there is a downside edge sure seems like a stretch for SPX.

Back to XIV…my original test examined performance over the last few days of the year. With volatility typically low, and seasonality generally regarded as bullish, I hypothesized there could be a strong bullish tendency for XIV. The results certainly refuted that hypothesis. But I am not of the opinion that they are great proof of an outright bearish edge for XIV.

 

 

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The Most Wonderful Week Of The Year!!!!

Over several time horizons op-ex week in December has been the most bullish week of the year for the SPX. The positive seasonality actually has persisted for up to 3 weeks. I’ve shown the study below in the blog many times since 2008. It looks back to 1984, which was the first year that SPX options traded. The table is updated again this year.

2017-12-11

The stats here remain extremely strong. Have a wonderful (and bullish?) December Opex Week!

 

 

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Why The SPX Reversal May Be A Positive For The Bulls

Before spending much Monday selling off, the SPX managed to make a new intraday all-time high. The new high followed by a poor and downward close triggered the study below, from the Quantifinder. Results are all updated.

2017-12-05

Results here seem to suggest an upside edge over the next 1-2 weeks. Though the reversal may have felt frustrating to bulls at the time, it does not appear to be substantial worry for the near term.

 

 

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When NDX Drops Big On A Day SPX Posts An Intraday High

It was interesting that the new intraday high Wednesday for SPX came on a day when NDX had its worst day since August. The study below looks at other instances of a 50-day high for SPX and the biggest drop in 50-days for NDX.

2017-11-30

Results are fairly impressive, and suggest a bullish edge based on limited instances. It is notable that every instance had a run-up of at least 4.8%, and the largest drawdown was under 3.2%. So yesterday’s SPX/NDX action appears to be potentially favorable for the intermediate-term.

 

 

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SPY’s 2-Day Pattern Suggesting A Bullish Tendency For Tuesday

SPY gapped up and closed lower Monday after leaving an unfilled up gap on Friday. This triggered the study below that examined similar price action in SPY with regards to how it gapped and finished.

2017-11-28

The numbers here all look solidly bullish. This suggests a possible upside edge for Tuesday based on SPY’s pattern of the last few days. Traders may want to keep this in mind today.

 

 

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October Opex Week Historically Bullish

Option expiration week is often a pretty good week for the market. October is one of those months where it has been especially good over the years. This can be seen in the study below.

2017-10-16

I decided to exclude 2008 because action that week was such an incredible outlier that it greatly skewed all the stats. (The week started with an 11.5% gain on Monday of 2008.) Even without 2008, results 1-4 days out look pretty solid.
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The Persistent Move Higher In The Russell 2000

The persistency of the move higher is very impressive. For instance, the Russell 2000 has now finished in the top 20% of its moving 10-day range for 22 trading days in a row. That is over a month. I looked back at other times this has happened. Below is a list of all prior instances and their 5-day returns.

2017-10-11

It is an impressive list, with the only loser being very small. But with only 1 instance in the last 20 years, it is tough to read too much into the results. Still, it does underline the fact that the Russell’s move is quite impressive, and it is showing persistency that has rarely been seen since the 90s.

 
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