Yesterday I decided to examine performance of XIV during the last few days of the year. The thought was that we are now in a time period that is generally regarded as seasonally bullish. Additionally, volume and volatility are often light this week with many traders on vacation. So I thought with low volatility and bullish seasonality, it could be a bullish time for XIV (the inverse-VIX etf). I checked. Here is the table from yesterday…

These numbers certainly do not look bullish. They could even be viewed as bearish. Even the lone “winner” saw XIV undergo a drawdown of nearly 11% before closing up $0.01.

So is there a bearish edge? One person suggested I also look at ZIV, which looks at medium-term volatility measures, rather than short-term.

These results are also weak, but not nearly as bad as XIV. Let’s also consider how SPX has done.

It has been a fairly tough time for SPX over the last few years. So XIV struggling during the same times is not a big surprise. If someone were to examine the last 6 years, they might believe there is a downside edge. I’m not terribly comfortable with such a small sample size. A look at a longer-term chart and stats for SPX might show why.

It’s been a bad run the last few years. But suggesting there is a downside edge sure seems like a stretch for SPX.

Back to XIV…my original test examined performance over the last few days of the year. With volatility typically low, and seasonality generally regarded as bullish, I hypothesized there could be a strong bullish tendency for XIV. The results certainly refuted that hypothesis. But I am not of the opinion that they are great proof of an outright bearish edge for XIV.

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It was interesting that the new intraday high Wednesday for SPX came on a day when NDX had its worst day since August. The study below looks at other instances of a 50-day high for SPX and the biggest drop in 50-days for NDX.

Results are fairly impressive, and suggest a bullish edge based on limited instances. It is notable that every instance had a run-up of at least 4.8%, and the largest drawdown was under 3.2%. So yesterday’s SPX/NDX action appears to be potentially favorable for the intermediate-term.

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SPY gapped up and closed lower Monday after leaving an unfilled up gap on Friday. This triggered the study below that examined similar price action in SPY with regards to how it gapped and finished.

The numbers here all look solidly bullish. This suggests a possible upside edge for Tuesday based on SPY’s pattern of the last few days. Traders may want to keep this in mind today.

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From a seasonality standpoint, there isn’t a more reliable time of the year to have a selloff than this upcoming week. In the past I have referred to is as “The Weakest Week”. Since 1961 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 56 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 – 2016.

The consistency and net results appear quite strong. I note the only instance that didn’t post a lower close at some point during the following week was in 2001. And the 9/11 attacks certainly made for unusual circumstances that year.

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It is notable that Wednesday was the 2nd day in a row with an unfilled up gap. The study below appeared in the Quantifinder last night, and has been updated with current stats. It examined other times SPY left 2 unfilled up gaps and closed at a 50-day high.

The size of the follow-through isn’t terribly large, but it has been quite consistent that some follow through was achieved in the next few days. This suggests the current momentum may be followed by further short-term gains.

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As many readers of this blog are aware, on Saturday I will be doing a 175 mile bike ride from Boston, MA around Cape Cod to its tip in Provincetown for the Multiple Sclerosis Society. I have offered anyone that donates any amount of money a copy of the QE Fed Day MS Ride package, which includes a pdf copy of the Quantifiable Edges Guide to Fed Days, along with Fed Day code to allow people to create their own studies.

To date, 30 Quantifiable Edges readers have donated a total of $1094, which I am very thankful for. Donations have ranged from $5 to $100. And what really struck me when I looked at the list was where the donations have come from. MS is worldwide issue, and so far we have seen donations come from 10 countries on 4 continents! They are USA, Canada, Australia, Germany, Ireland, United Kingdom, Israel, Netherlands, and South Korea!  Thanks to all!

The ride is on Saturday & Sunday, so there is a little more time to get your donations in an take advantage of the Bike MS Fed Day offer!

Here again is the process…

1) Go to my personal fund raising page:

https://main.nationalmssociety.org/goto/robridesreallyfast

2) Make a donation of any size (but feel free to be generous!). Note: The MS donation page makes it look like the min amount is $35. But you can click the “other amount” button on the right and enter whatever amount you feel appropriate. Even small gifts are greatly appreciated!

3) Send an email to support@quantifiableedges.com with your receipt from the MS Society, and within 24 hours we will send you the above Quantifiable Edge Fed Day MS Ride package. (If you don’t receive it in 24 hours, feel free to send us a 2nd email, because that means we likely missed the 1st one, or post a comment below letting us know we somehow missed it!)

And once again, here is what you will receive…

1. The Quantifiable Edges Guide to Fed Days (pdf version)
2. My Tradesation “Fed Day” code that show every Fed Day and the day before from 1982 – 2017.
3. Text file versions of the code in case you do not use Tradesation, but still want the full list of dates, or to translate the code into another program for your own testing.

Note that the code has never before been offered with the book. So even if you already have the book – make a donation and get the code!

Thanks for all your support!

(I will be tweeting updates during the ride, so you can see how far I am getting throughout the day.)