Persistency Beyond Almost All Other Rallies

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

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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The Most Wonderful Week of the Year…Until Last Year

I have written many times over the years about the bullish tendency of the market during opex week in December. I’ve even referred to it as “The Most Wonderful Week of the Year”. And it was…up until last year. So below is an updated look at the stats and profit curve for owning SPX from the close of the Friday before December opex to the close on December opex.

2019-12-16

That is a 7% loss you are looking at in 2018. So that will likely take several years to get over. But we are entering the time of year when the market typically has the seasonal winds at its back. And despite the 2018 December collapse, that is something traders may want to keep in mind this week (and even a bit longer).

 

 

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Historical Fed Day Performance By Chairperson

I have written about Fed Day edges for years. Much of the research can be found in the Fed Study category blog posts. Today I decided to share a chart showing historical performance on Fed Days over the course of the last 5 Fed chairpeople.

2019-12-10

Have a happy Fed Day tomorrow!

 

 

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Black Friday Sale at Quantifiable Edges!

We have decided to bring Black Friday to Quantifiable Edges for the 2nd time. We rarely have special sales at Quantifiable Edges, and have not had any since last year, so if you have been thinking about a subscription, or the Swing Trading Course, now is the best opportunity you’ll see for a long time.  Check out our best offers below to start trading with a Quantifiable Edge!

 

  • Quantifiable Edges Gold Annual (with access to the Market Timing Course)  – $850 for the next 13 months!  That is $550 savings versus a monthly subscription and a separate Market Timing Course purchase!  After the initial 13-month period, subscription will renew at the annual rate of $950.

 

  • Quantifiable Edges Annual Preview Offer  $32 for the last 32 days of the year, then $950 for 2020! For those who have never subscribed before, here is a low-cost extended look at all the gold subscription has to offer to help you finish off 2019 with a Quantifiable Edge.  This will renew at our low annual rate for 2020.

 

  • Quantifiable Edges Swing Trading Course $200 off. Down from $950 to $750! This is the lowest price ever offered for our highly rated course that teaches a quantified approach to swing trading.

 

The Quantifiable Edges Black Friday sale won’t last long, and it may never return.  To take advantage, simply use the link below now to sign up.

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Happy Thanksgiving!

 

When the Wednesday Before Thanksgiving Closes at a New High

Thanksgiving has some seasonal tendencies, with Wednesday and Friday often being bullish, and the Monday after being bearish. This year not only did Wednesday perform well, but it left the SPX at a new high heading into the holiday. So I decided to look back at other times SPX closed at a 50-day high on the day before Thanksgiving.

2019-11-28

Results here show a bearish inclination over the next 2 days. I will note that there were a couple instances that occurred just prior to the sample set that were mildly positive over the 2-day period. But the poor performance over the last 24 years (7 instances) is something I find notable and interesting. Below is the list of instances.

2019-11-28-2

The momentum heading into Thanksgiving certainly has not seemed to help at all. If recent history holds up, we could see a dip between now and Monday evening.

 

 

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One Look At What Recent SPX Persistence Might Mean

One compelling study that triggered Tuesday in the 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.

2019-11-20-1

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. The 2-day timeframe suggests a short-term boost is also likely. Below is a look at the profit curve for the 10-day holding period.

2019-11-20-2

The strong, steady upslope is impressive. The market is long overdue for a temporary pullback. But evidence like this suggests any dip in the coming days is likely just temporary. Traders may want to keep this in mind as they determine their bias over the next 1-10 days.

 

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2 Unfilled Up Gaps And A 50-Day High

Monday not only saw SPY make a 50-day high, but it was also the 2nd day in a row with an unfilled gap up. The study below is from last night’s letter and was previously discussed several other times in the subscriber letter (click here for free trial). It examined other times SPY left at least 2 unfilled up gaps and closed at a 50-day high.

2019-11-05-1

The size of the follow-through isn’t terribly large, but it has been very consistent that some follow through was achieved in the next few days. Below is the 3-day profit curve.

2019-11-05-2

We have tracked this study for a long time, and it is back again at new highs. Traders may want to keep this bit of evidence in mind as they formulate their short-term bias.

 

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A Columbus Day Edge Revisited

While the stock market is open on Monday, banks, schools, government offices, and the bond market are closed. In past years with the bond market closed, the stock market has done quite well on Columbus Day. Of course the most famous Columbus Day rally was in 2008 when the market gained over 11% after having crashed the week before. A few times here on the blog (most recently 10/12/15) I showed that positive momentum leading up to Columbus Day has generally led to a positive Columbus Day. Columbus Day has been celebrated on the 2nd Monday of October since 1971. Below are updated results of that study.

2019-10-14

I’ve circled some of the more impressive stats here. With 73% of trades profitable and winners over twice the size of losers risk/reward has been very favorable. This positive seasonal tendency may be worth some consideration today.

 

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The Weakest Week (2019 update)

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.

2019-09-20-1

As you can see the bearish tendency has been pretty consistent over the last 59 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 – 2018.

2019-09-20-2

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.

 

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Post-Announcement Fed Day Returns Since Powell Arrived

I have documented before the tough time that Fed Days have had since Chairman Powell took over in February of 2018. I have also shown that the historically bullish Fed Day edge has primarily played out before the Fed announcement is even made. So today I thought I would simply show how SPY has performed between the time of the announcement and the NYSE close on Fed Days since Mr. Powell took over.

2019-09-17

No big surprise here. The market has struggled. We’ll see if it likes tomorrow’s announcement any better. Many more Fed related studies can be found here.

Wishing you and yours a very merry Fed Day!

 

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The Great Rotation Continues

Tuesday night on Twitter I showed how Monday and Tuesday saw a massive rotation among S&P 500 constituents. The top stocks over the 1-year period leading up to last Friday had all seen substantial selling during Monday and Tuesday. And the bottom stocks had all rallied strongly. This all happened with almost zero net change to the SPX index. I decided to follow up on that study today to see how those stocks made out with the SPX rally on Wednesday. Below are updated tables. The right-hand columns show performance on Wednesday.

2019-09-12

We see that even with the market rally on Wednesday the Great Rotation continued. All 10 of the bottom ranked stocks rallied further on Wednesday. Meanwhile, 7 of the 10 top ranked stocks underwent further selling. The split was not as drastic as Mon-Tues. Wednesday the bottom ranked stocks outperformed the top stocks by about 2% on average. Over the Monday – Tuesday period it was a 15.5% outperformance. Still, anyone running a long-short momentum strategy was not provided any relief on Wednesday. I am working on some deeper research exploring historical implications of violent rotations like these.

I will note at this point that swing traders may be able to find some decent bounce candidates on the Top ranked list. Strong short-term pullbacks during longer-term uptrends will often create solid short-term buying opportunities. The stocks on the left generally fit that description nicely. But with such unusual market action, this is not your typical pullback for many stocks, and risks could be elevated. Caveat emptor.

 

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What A Leading Advance/Decline Line Has Meant Historically

I have seen a good amount of chatter this week about the recent highs in the NYSE Advance/Decline line and other breadth measures showing bullish strength. The advance/decline line simply takes the net number of advancing NYSE stocks on a daily basis and then sums that number from one day to the next, making a line. If the line is moving up, that means there are more advancing stocks than declining stocks. A move lower mean there are more decliners. My A/D line Amibroker chart can be seen below.

2019-09-09-1

The move to a new high is clear. And having that happen ahead of an SPX new high is generally regarded as a positive. So I decided to run some studies and examine other times the NYSE A/D line broke out to a 1-year high while SPX had not hit a new high for at least a month. The table below shows results going back to 2003.

2019-09-09-2

Numbers here are strong across the board. I looked at several profit curves in this weekend’s subscriber letter (click for free trial). I’ll focus on the 20-day results here on the blog. Below is a look at the profit curve for the 20-day test.

2019-09-09-3

That is a steady and impressive upslope. The intermediate-term implications of the A/D line hitting leading new highs since the end of the 2000 – early 2003 bear appear to have been quite bullish. Interestingly, I found performance of this study prior to 2003 to be streaky and less reliable. This can be seen in the chart below, which goes back to 1931.

2019-09-09-4

It certainly appears the leading A/D line has been a positive over the last 16 years. And I am viewing it as a positive right now. But the edge has not always been as reliable. So as with all studies, it is worth keeping an eye on to make sure the bullish message persists.

 

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An Updated Look At SPX Performance After Labor Day

A couple of years ago on the blog I showed a study suggesting that Labor Day week performance has been somewhat dependent on whether the market has rallied over the 20 trading days leading up to it. I decided to update that study today.  Below is a look at post-Labor Day performance when the previous 20 days have seen gains versus losses. First lets look at rises into the holiday (unlike now).

2019-09-02-1

This shows a poor performance record when there has been a rise in the market. But in 2019 SPX has posted a decline over the last 20 days. So we are facing the below scenario.

2019-09-02-2

Just the opposite here. The market appears to lean towards gains during Labor Day week under such circumstances. Of course there are a few caveats to keep in mind. For one, instances are a bit low. Secondly, while we are down over the 20-day period it is not by much, and with SPX near the top of its recent range, any “oversold” edge here may not be in place. Still, the results do give us some information to consider as we head back to work on Tuesday. Happy Labor Day!

 

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Why the CBI is Zero Despite Friday’s Big Drop

I received several notes on Friday from people that were curious about the Quantifiable Edges Capitualtive Breadth Indicator (CBI). The CBI actually closed at zero on Friday. Often when we see large selloffs there will be a spike in the CBI. The CBI is a count of all the active Catapult signals, which are tracked in the Quantifiable Edges Subscriber Letter. They basically look for a trend to be in place, and then a downward acceleration of that trend. So the CBI will typically spike when you have a good number of stocks experiencing prolonged selloffs. And that is most likely to occur while the SPX is also undergoing a sustained selloff. The chart below shows the CBI action over the last year.

2019-08-24

As you can see, the spikes occurred when the persistent selling became overdone. But the recent action is not persistent selling. It is exaggerated choppiness. So the CBI is dormant, and it will likely remain so unless we see a substantial breakdown.

 

Much more information is available on the CBI in the free CBI Research Paper.

 

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