Quantifiable Edges | Assessing Market Action With Indicators & History

Rob Hanna, founder

Quantifiable Edges has been publishing quantitative research, systems, and trading ideas since 2008. We utilize technical analysis concepts and quantify them in a way that allows traders to determine the edge that was provided in the past. Breadth, volume, sentiment, volatility, Fed-induced liquidity, seasonality, and price action are all used to assess market conditions. Gold and Silver level subscribers are led through Rob Hanna’s interpretation of the data in a simple and complete manner via the nightly and weekly subscriber letters. Gold subscribers also have complete access to our subscriber area, which includes the Quantifinder, custom charts, trading systems (with code), special research, and more.

Both private and institutional traders have taken advantage of the vast tools and studies that have been developed over the years. Some of the most popular indicators include the Quantifiable Edges Capitulative Breadth Indicator (CBI) and the Aggregator. Quantified research related to Fed policy and action around Fed Days is available. Subscribers also have access to the full archive of letters back to 2008, which include thousands of original studies.

Additionally, Quantifiable Edges provides unique courses for longer-time market timing and quant-based swing trading. Both self-paced courses include detailed market research, and show traders how to take advantage of it. They also come with supporting software for those traders interested in furthering the research and ideas on their own.

And for traders that are interested in mechanical trading strategies, the Quantifiable Edges ETF Momentum Swing Portfolio provides nightly signals, while the Quantifiable Edges Big Time Swing System is an open-coded, robust, non-optimized trading system that can be traded as-is or used as a base for traders to adapt into their own system.

Beginner, advanced, and institutional traders have all taken advantage of the research, teachings, and tools provided by Quantifiable Edges since 2008. Free trials to the gold subscription service are offered with just name and email required. You may follow Quantifiable Edges on Twitter (@QuantifiablEdgs), Facebook, LinkedIn, or receive blog posts and updates from Quantifiable Edges directly to your email.

Recent Afternoon Selling Could Be Setting SPY Up To Bounce

Posted on October 22, 2020 by Rob Hanna

Despite attempts to put in rallies over the last few days, SPY has been persistently weak in the afternoon. It has not managed to hold gains and has closed in the bottom 25% of its daily range for the last 4 days in a row. That may not sound all that extreme, but it is quite rare. Below is a look at how the market has performed following past occurrences. It looks back to the inception of SPY in 1993.

The numbers are very lopsided in favor of the bulls. Below is a list of all instances assuming a 5-day holding period. The bears have owned the afternoons lately. It appears in the next few days the bulls will have their chance, and this study suggests an afternoon that does not go to the bears could turn into a sizable move higher.

I do not see anything here that alarms me. The bears have owned the afternoons lately. It appears in the next few days the bulls may have their chance. This study suggests an afternoon that does not go to the bears could turn into a sizable move higher.

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The Next 5 Weeks All Are Among The Weakest - And Strongest - Of The Year

Posted on October 2, 2020 by Rob Hanna

October is a month that is known for volatility. And that is a well-earned reputation. Crashes in 1929, 1987, and 2008 all occurred in October. But volatility cuts both ways. If you break the year down into 1-week periods, October also contains some of the strongest seasonal edges of the year, both bearish and bullish. Breaking the year down by week is something I have done numerous times over the years, and it has provided some interesting insights. The table below shows stats back to 1985. I chose 1985 as the start date because SPX options trading began in 1984, so 1985 is the 1^st full year where there was an options expiration schedule. We have found over the years that options expiration can generate strong edges. Action on and around options expiration, which occurs on the 3^rd Friday of each month, helps to generate some seasonal tendencies. So this study encompasses the full range of time that SPX options have been in existence.

You’ll note that the highlighted weeks are the October weeks. It’s amazing that all 5 potential weeks in October are included in either the Best 10 or the Worst 10 weeks of the year. Weeks are ranked based on Avg Trade (last column).

Weeks following the 1^st and 3^rd Friday in October have been among the worst on average. I’ll also note that the 2 largest “max losing trades” occurred following the 1^st and 3^rd Friday in October. They were a 12% and an 18% drop.

Weeks following the 2^nd, 4^th, and 5^th Fridays in October made up 3 of the best 10 weeks of the year on average. And the 2^nd and 4^th week show two of the largest winners as well, with 7.3% and 10.5% max gains.

As I said, October can be volatile. Traders may want to keep the patterns of the last 35 years in mind. Seasonality will be swinging back and forth between bullish and bearish. Paying some attention might help your accounts survive through Halloween.

I’ll also note that Tom McClellan wrote an interesting piece on October seasonality during election years.

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Is the Weakest Week Still Weak When There is Weakness Prior to the Weakest Week?

Posted on September 20, 2020 by Rob Hanna

As I have shown many times in the past, there isn’t a more reliable time of the year to have a selloff than this upcoming week. I have often referred to is as “The Weakest Week”. Since 1960 the week following the 3rd Friday in September has produced the most bearish results of any week. Below is a graphic to show how this upcoming week has played out over time.

As you can see the bearish tendency has been pretty consistent over the last 60 years. There was a stretch in the late 80’s where there was a series of mild up years. Since 1990 it has been pretty much all downhill. Below is a table showing results of buying Sept. op-ex Friday and then selling X days later from 1990 – 2019.

The consistency and net results appear quite strong. I note the only instances that didn’t post a lower close at some point during the following week was in 2001 and 2017. The 9/11 attacks certainly made for unusual circumstances in 2001, and 2017 did not see a decline, but it only rose 2 points, so it was not much of a victory for the bulls.

But this year seems a little different, because this is the 1^st time since I have been running these tests that we are headed into the “weakest week” having already closed down 2 weeks in a row. (It has actually been three weeks.) That had me wondering whether the seasonal weakness may have come a little early this year. So I ran a test to look at other instances since 1960 that SPX had at least 2 losing weeks in a row leading up to the post-3^rd Friday setup.

This certainly does NOT suggest the seasonal weakness came early. Nine of ten instances where there were 2 down weeks leading up to the “weakest week”, will still saw the “weakest week” close lower. And all 3 instances where there were 3+ down weeks still had at least one more down week to go. So I am viewing poor seasonality as a bearish short-term factor this upcoming week.

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Looking at 7-day Win Streaks

Posted on August 11, 2020 by Rob Hanna

The recent rally has left the market short-term overbought by most measures. Short-term overbought often triggers some studies that suggest a downside edge, but when the overbought condition gets very strongly overbought, then those downside edges often disappear. And at some point, rather than strength leading to weakness, the strength will beget more strength. The strong move higher over the last several days has turned the market so overbought that we are seeing this scenario begin to unfold. The study below looks at the 7-day win streak in the Dow Jones Industrial average. It exemplifies this concept.

There is not much of an edge over the 1^st few days. But once you get out a little further, the stats appear solidly bullish. Below is a look at the profit curve assuming a 19-day holding period.

The strong move from lower left to upper right appears to offer some confirmation of the bullish tendency. In last night’s subscriber letter, I also looked at the same setup with SPX, since SPX has also posted 7 higher closes. Results were very similar. Short-term momentum has been so strong recently that it appears likely to carry through some on an intermediate-term basis.

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My NAAIM Webinar...

Posted on July 22, 2020 by Rob Hanna

Last week I had the honor of being a guest speaker for the National Association of Active Investment Managers (NAAIM)) webinar series. The topic I discussed was “Quantifiable Edges for Active Investing”. That recording is now available to view on the NAAIM website (email registration required). And if you are an investment manager, you may also want to learn more about NAAIM.