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.

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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.

Big Gaps Down In Already Bad Markets

Posted on March 8, 2020 by Rob Hanna

SPX futures are locked limit down 5% as I write this Sunday night. The small study below looks at all other times 1) SPY was already short-term oversold (closed at a 5-day low), and 2) gapped down at least 3%, and 3) opened below the lowest close of the previous 50 days. Below is the full list of instances along with performance following each:

2020-03-08

A few notes:

These numbers look pretty wonderful. Don’t get too excited.
Performance only goes back to the inception of SPY. I did that because historical open/high/low prices for SPX are not accurate. Just closes. So measuring gap sizes and high/low levels is impossible. Hence the somewhat short history.
There are only 6 instances. You generally do not want to make too much of just 6 instances. What this does do well is make the point that the market is acting far outside of normal.
Not listed among these 6 instances is the 10/6/2008 instance, because that “only” gapped down 2.89% to start the day (just missing the 3% criteria). From the open that day to the low of the next 5 days, SPY lost as much as 22% intraday.
Had SPY existed in 1987, Black Monday would almost certainly have qualified.
It is tough to identify a high-probability play on a combination of forces unlike anything seen prior.

I also ran the study without the requirement that the day before closed at a 5-day low. There were a few more instances. Here is that table.

2020-03-08-2

Good luck trading this week!

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An Updated Look At Huge 1-Day CBI Spikes

Posted on February 26, 2020 by Rob Hanna

The Quantifiable Edges Capitulative Breadth Indicator (CBI) spiked up 14 points on Tuesday – rising from 5 up to 19. In the CBI Research Paper I showed that a CBI total of 10 or more has generally been a bullish sign. So 14 is a very strong 1-day change. In June I examined all other instances where the CBI spiked by at least 10 points in 1 day. I have updated that research below.

2020-02-26

The setup is rare, but there are some very strong numbers here. Over the next week the average instance gained 3.9%, and the average 18-day % gain was 6.6%. Below is a look at all the individual instances.

2020-02-26-2

Here we see that the bounces have typically been strong, but they have not always been immediate. 2002, 2008, and 2015 all show some additional scary selling before the big reversal arrived. The CBI is suggesting a strong chance of a sizable bounce over the next week or more. It may or may not begin on Wednesday.

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When The Market Gaps Down Huge During A Long-Term Uptrend

Posted on February 24, 2020 by Rob Hanna

With corona virus news scaring the market pre-open today, I decided to look back at other time SPY has gapped down more than 2% when it had been in a long-term uptrend. As you might suspect, instances have been fairly rare. Looking ack to SPY inception, there were only 16 other instances. And upping the filter to 2.5%, the instances drop to just 5. (As I type, SPY is indicating 2.4% below Friday’s close with about 1 hour until the open.)

2020-02-24

Every scare is different. But most of the time in the past we have seen a decent bounce at some point in the next few days. Today, and the next few days should be interesting. (But the market is often interesting to me, and 2020 does not appear like it is going to be dull.)

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Persistency Beyond Almost All Other Rallies

Posted on January 22, 2020 by Rob Hanna

Last week I noted the current rally was reaching historical extremes for persistency. Here I will look at another study from the subscriber letter, and then update last week’s study. In last night’s letter I looked at all times back to the inception of the NASDAQ in 1971 in which both SPX and the NASDAQ Composite closed above their 10ma for at least 30 days in a row. The short list is below.

2020-01-22

Only 3 previous instances. And one of those was in the current move higher during November. Of course another way to look at it is how I did last week, in that SPX has only seen 5 closes below the 10ma since October 10th. We have now reached the point where just 5 of the last 70 trading days have closed below the 10ma. Other times where that has happened are 1972 (March), 1965 (Nov), and 1933 (Jul). That is it. And if it reaches 5 out of 71 days on Wednesday, then it is just 1972 and 1933 that you can point to.

Finding short-term trading opportunities in such a market can be difficult. It is tough to find a meaningful historical edge when the market is trading so far beyond historical norms.

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The Remarkable Persistency of the "not QE" Rally

Posted on January 16, 2020 by Rob Hanna

The persistency of the rally over the last 3 months has been amazing. The chart below is of SPX. I have marked where the Fed announced the “not QE” program back in October. The blue line is the 10-day moving average of SPX.

2020-01-16

I have noted a few times lately that the market has gone an extended period without any closes below the 10ma. But what is more remarkable is how few days it has closed below the 10ma since “not QE” was announced on October 11th. In the last 67 trading days, there have only been 5 closes below the 10ma for SPX. There has not been a 67-day period with only 5 closes below the 10ma since 1972. And looking back to 1928 (when the S&P 500 was the S&P 90), there have only been 6 other instances: September 1929, July 1933, March 1943, June 1957, November 1965, and late February / early March of 1972. In other words, the persistency of this rally is extremely rare, and over the last 48 years, it is unheard of.

Note: The article above is an excerpt from last night’s Quantifiable Edges Subscriber Letter

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