Quantifiable Edges | Assessing Market Action With Indicators & History

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Quantifiable Edges Overview

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, Seasonality Calendars, 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.

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.

Action Mon-Tues Can Skew $FED Day Odds On Wednesday

Posted on March 20, 2023 by Rob Hanna

While the Fed decision will certainly play a part in how the market performs on Wednesday, another factor that has historically played into Fed Day odds is simply how the market performed leading up to that decision. A rally into a decision has often lead to disappointment (or “sell the news”). A selloff into a decision often indicated the market is preparing for the worst, and you’d see a relief rally. This is demonstrated in the studies below. They show SPX Fed Day performance when SPX closed at a 5-day high vs a 5-day low the day before. With SPX now in the middle of its 3-day range, we could easily end up at either of these extremes on Tuesday.

Clearly a 5-day low sets up for better Fed Day odds. It will be interesting to see how the market acts over the next two days heading into the Fed decision.

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When $SPX is making new lows and the CBI is zero

Posted on March 10, 2023 by Rob Hanna

Concerning about the current selloff is the fact that the Quantifiable Edges Capitualtive Breadth Indicator (CBI) remains at zero. Most subscribers understand that spikes in the CBI can often be a strong indication that a bounce is near. But a low CBI can also be a useful indication. The study below looks at other times SPX closed at a 20-day low and below the 200ma and the CBI posted a zero reading.

The lack of capitualtive selling seems to suggest there could be more selling to come before a bounce occurs. Below is a look at a profit curve assuming a 5-day holding period.

That is a strong & steady decline. To see how this contrasts with times the CBI closed above zero, I ran a couple of other tests. This next one requires readings of between 1-7.

The red has turned to green in the Average Trade results. Instead of a downside edge, it appears there is a moderate upside edge. Of course the largest edges tend to occur when the CBI is giving high readings. The last study below looks at the same setup, but with a CBI over 7.

These results are strongly bullish. But this is not the current situation. The CBI of zero has us facing the first CBI study above, and that suggests more selling in the next week.

Of course the employment report that will come out before the open could trigger a large reaction either way. And we will also be faced with CPI numbers coming Tuesday. In other words, there is strong potential for large swings in either direction. This market has plenty of risk and I do not see a compelling indication that a bounce is highly probable at this point.

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A CBI of 8 or 9 and a 20-day low above the 200ma

Posted on March 2, 2023 by Rob Hanna

Wednesday on Twitter I noted that the Quantifiable Edges Capitulative Breadth Indicator (CBI) has begun to perk up. It closed at 8 on Wednesday. I have historically viewed readings of 10+ as bullish. But even getting near that will often generate an upside edge. The study below is from last night’s subscriber letter. It looks at other times SPX closed at a 20-day low & above the 200ma, and the CBI read 8 or 9.

The stats appear solidly bullish. Below is a look at a profit curve that assumes a 4-day holding period.

That is a fairly straight shot from lower left to upper right. Falling a little short of a CBI reading of 10+ still seems to have led to very positive performance under similar circumstances. Traders may want to keep this in mind when setting their market bias.

I will also note that another down day on Thursday could see the CBI reach 10. That is not a magical level, but it has been a good indication over the years that a bounce is likely within a few days.

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SPX Golden Crosses Since 1928

Posted on February 2, 2023 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 7/9/20 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.)

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 drawdowns to endure. The 2020 drawdown was the biggest since the 40s. Despite some fairly sizable drawdowns, the Golden Cross would have beaten “Buy and Hold” handily. Over the time period measured, the SPX had a compound annual growth rate (CAGR) of 5.57%. Simply incorporating a Golden Cross filter would have raised the CAGR to 7.25%. It is a bullish long-term trend indication. But it is not a bulletproof long signal.

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An Unprecedented Breadth Trifecta has Triggered

Posted on January 16, 2023 by Rob Hanna

On Thursday afternoon I witnessed 3 different breadth thrust signals I watch all trigger on the same day. The signals, with link to learn more about them are:

Walter Deemer’s Breakaway Momentum (BAM) signal
Wayne Whaley’s Advance Decline Thrust (5) from his paper “Planes, Trains, and Automobiles: A Study of Various Market Thrust Measures”
Quantifiable Edges “Triple 70” thrust signal.

Thursday was the 1^st time ever that a Triple 70, a Deemer Breakaway Momentum (BAM), and a Whaley ADT5 thrust all happened on the same day. There have been 7 instances where 2 of the 3 triggered on the same day. They can all be found in the table below.

The signals on their own all have impressive track records, which you can see if you click through to the links. When 2 combine, it has been almost perfect 1-12 months out. All the recent breadth certainly seems to be a positive.

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