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.

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.

SPX Golden Cross History Since 1928

Posted on July 9, 2020 by Rob Hanna

SPX will post a Golden Cross on Thursday afternoon. A Golden Cross occurs when the 50ma crosses over the 200ma. Having the 50ma above the 200ma is commonly considered a bullish market condition – and generally it is. In the 4/2/19 blog post I looked at SPX Golden Crosses dating all the way back to 12/31/1928. I have updated that research tonight with Amibroker Software and Norgate Data. Below is a list of all Golden Crosses since then. (Note that prior to 1957, S&P 90 data was used. The S&P 90 is considered the predecessor to the S&P 500.)

The most recent Golden Cross formation got slammed by the March COVID crash. But since the 1961 trigger, the Golden Cross has generally served as a fairly good timing device to sidestep large portions of bear markets. Prior to that it was not nearly as effective. This can be seen in the drawdown chart below. (Note: Overnight Fed Funds rate was used to calculate nightly interest starting in July 1954, which is as far back as my data goes. Prior to that, no interest rate was assumed when out of the market.)

While drawdowns have been mostly fairly moderate since the mid-50s, prior to that there were some very large drawdown to endure. Of course, the 2020 drawdown is the biggest since 1940 – and we still have a good ways to go for the system to dig out of it. Despite some fairly sizable drawdowns, the Golden Cross would have beaten “Buy and Hold” handily. It is a bullish long-term trend indication. But it is not a bulletproof long signal.

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First Day of Month Based on Month

Posted on July 1, 2020 by Rob Hanna

Since the late 80s there has been a tendency for the market to rally on the first day of the month. One theory on why this occurs is that there are often 401k inflows that are put to work on the 1st of the month. I examined this tendency and broke it down by month on the blog in 2013 and 2009. I thought it would be interesting to take another look at it today. Below is an updated version of the study.

July has been the most reliable month in term of closing positive. And when looking at the size of the average gain, it comes in 2nd. You also note that August is the worst on both counts.

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