Blog | Quantifiable Edges | Assessing Market Action With Indicators & History

See Rob Hanna Today On TimingResearch’s Weekly Web Show – 3pm EST

Posted by Rob Hanna in Quantitative Study November 17, 2014

I have been asked to join a live discussion panel this afternoon being put on by TimingResearch. Each week, TimingResearch surveys a large group of traders to get their thoughts about current market conditions. TimingResearch then produces a report based on the survey.

The panel will discuss the market, our short-term outlooks, and the most recent weekly survey from the TimingResearch group. This is the 1st time I have been asked to sit on the panel, which is being guest hosted by my friend and colleague, Dave Landry.
Click here to learn more and sign up!

Date and Time:
– Monday, November 17, 2014
– 3PM ET (12PM PT)

Guest Host:
– Dave Landry of DaveLandry.com

Guests:
– Alla Peters of AlphaWaveTrader.com
– Rob Hanna of QuantifiableEdges.com
– Andrew Cardwell of CardwellRSIEdge.com

Can’t attend? Register now anyway in order to receive the archived recording if you are not able to attend live.

After registering, you will also be able to view archived reports & data. And you will also be registered to receive the weekly survey and report.

Some Short-Term Observations

Posted by Rob Hanna in Quantitative Study November 13, 2014

A few quick highlights of what I am seeing at the moment:

1) The market is extremely stretched short-term. I am seeing many indications of this. One example is that is has now been 19 days since SPY closed below its 5-day moving average. There have only ever been 5 other times SPY has done this. None of the streaks lasted longer than 21 days.

2) When the market has strong runs like it has recently, the first sign of a pullback rarely means the end of that run. This is exemplified by the study below, which triggered at the close on Wednesday.

2014-11-13 image1

From where I sit, when considering new short-term positions, this market is too stretched to buy and too strong to short.

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

Countdown To Vegas Traders Expo

Posted by Rob Hanna in Uncategorized November 5, 2014

The countdown is on. In just over 2 weeks I’ll be giving my presentation at the Las Vegas International Traders Expo. My topic is “Quantifiable Edges for Short-Term Trading”. And while I’m looking forward to talking, I am also really looking forward to seeing some old friends and meeting some new ones at the same time. This year’s speaker lineup again looks strong. Others I am hoping to see or catch up with include Corey Rosenbloom, John Bollinger, Nelson Freeburg, Stan Dash, John Person, and Larry McMillan.

I also look forward to meeting many Overnight Edges & Quantifiable Edges followers there. So if you see me wandering around the expo, please stop me and say hello.

For more information on the conference and to register (free) for the expo, click here.

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

The Incredibly Bullish Seasonal Period SPX Is Entering

Posted by Rob Hanna in Quantitative Study, seasonality November 3, 2014

With the calendar moving from October to November, it has now entered its “Best 6 Months”. The “Best 6 Months” tendency was first published by Yale Hirsch, founder of the Stock Trader’s Almanac, in 1986. The concept behind the “Best 6 Months” is simple. Seasonality suggests that over the last several decades the market has made a massive portion of its gains between November and April. And during the remaining 6 months, it has generally struggled to make headway.

Additionally, the market shifted into the 3rd year of the Presidential cycle. Here at Quantifiable Edges we measure the Presidential Cycle years from November – October rather than January – December. That allows the cycle years to better match up with the elections, which take place in early November. The 3rd year of the Presidential Cycle has been a strong one.

When the Best 6 Months and the 3rd Year of the Presidential Cycle have been active at the same time, the results since 1960 have been outstanding. In the table below I have listed out each instance.

2014-11-03 image1

All 13 instances since 1960 have shown gains. Of course there have been drawdowns along the way. The 1974-75 period saw SPX pull back 13.2% from its October closing price before rebounding and finishing April 18.1% above the October closing price. And in 2002-03 there was a 10.85% drawdown from the October close before finishing April 3.5% above it. But overall the stats have been incredibly lopsided. The average 6-month period saw a net gain of 16.5%. The average run-up (from the October close) was 18.7% and the average drawdown just 3.3%. Long-term seasonality does not get any better.

Much more information is available on these indicators in the Quantifiable Edges Market Timing Course. Also included in the course are price-based indicators that combine very well with the seasonals, along with possible long-term approaches to utilizing different combinations of price and seasonality. Code, supporting spreadsheets, and access to pages with indicator updates are also included in the course. For detailed information and to order you may use the link below:
https://quantifiableedges.com/subscribers/signup/MarketTimingCourse

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

An Indication That SPY Is Short-Term Overextended

Posted by Rob Hanna in Quantitative Study October 31, 2014

It has been a persistent move higher lately since the market bottomed mid-month. SPY has now gone 10 days without closing below its 5-day moving average (5ma), leaving it short-term overextended. The study below looks at other instances in which the market traded above the 5ma for at least 2 weeks and closed at a 10-day high.

2014-10-31 image1

In the past this setup has commonly been followed by a short-term pullback. The downside edge doesn’t last long, though. This seems to pretty much play itself out over the first 2 days. This study is one hint that the market is overdue for a bit of a pullback. As of last night I was still seeing more bullish evidence than bearish. With the big gap up this morning, it will be interesting to see whether a breakaway gap occurs and extends the rally further, or whether the short-term overbought nature of the market causes it to pull back as it often does.

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

What The Strong Breadth On Tuesday’s FTD Suggests

Posted by Rob Hanna in IBD Follow Through Day, Quantitative Study October 22, 2014

Over the years I have done a good amount of work quantifying IBD Follow Through Days (FTD). In the 8/24/11 blog I looked at the impact of breadth on FTDs. To compare breadth across market regimes, instead of using absolute breadth readings I use relative breadth readings. The study below uses the 1-yr Up Issues % Rank. This reading compares breadth versus all other days for the last year. Tuesday’s strong breadth placed it in the 99th percentile breadth-wise. This first table below looks at performance following FTDs that came along with an Up Issue % reading that was among the top 5% of all readings over the previous year. All stats are updated.

2014-10-22 image1

As you can see there appears to be a tendency for the market to continue higher after these strong-breadth FTDs. Now let’s examine performance after FTDs on days that did not show exceptional breadth strength.

2014-10-22 image2

As you can see, there is no discernible short-term edge here. From an intermediate-term perspective, I would also note that breadth seemed to play a part there as well. When the Up Issues % Rank was > 95% then 22 of 42 instances (52%) managed to post successful rallies. When breadth was not as strong on a FTD, then only 19 of 44 instances (43%) went on to successful rallies.

(Note: For purposes of all the FTD tests, a “successful rally” was defined as one that achieved the lesser of 1) twice the distance from the close of the Follow Through Day to the low of the potential bottom day, or 2) a new 200-day high.)

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

My Recent Tradestation Webinar Is Now Available On-Demand (Free)

Posted by Rob Hanna in Uncategorized October 20, 2014

A couple of weeks ago I did a webinar with the folks at Tradestation titled “Quantified Methods for Long and Short-Term Trading”. That webinar is now available for viewing at the Tradestation website. I have provided a link below. Enjoy!

https://www.tradestation.com/education/events/on-demand-webcasts/spotlight-on/rob-hanna-10-7-2014

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

What Persistently Weak SPY Closes Have Led To In The Past

Posted by Rob Hanna in Quantitative Study October 15, 2014

Despite attempts to put in rallies over the last few days, SPY has been persistently weak in the afternoon. It has not managed to hold gains and has closed in the bottom 25% of its daily range for the last 4 days in a row. That may not sound all that extreme, but it is pretty rare. Below is a look at how the market has performed following past occurrences. It looks back to the inception of SPY in 1993.

2014-10-15 image1

Instances are a little low, but the numbers are very lopsided in favor of the bulls. It will be interesting to see if the market can overcome its current funk and large gap down this morning to keep the string of short-term rallies alive.

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

Quantifiable Edges CBI Hits 12 On Monday – What That’s Meant For The Intermediate-Term

Posted by Rob Hanna in CBI, Quantitative Study October 14, 2014

I’ve written an awful lot about the Quantifiable Edges Capitulative Breadth Indicator (CBI) here on the blog. The CBI moved up from 7 to 12 on Monday. While 10 has been a strong indication for a short-term bounce, 11 or higher has been a reliable indication for the intermediate-term. Monday was just the 22nd time the CBI reach as high as 11. Looking out 20 days later, every other instance has been trading higher. Below is the full listing of triggers and the 20-day results.

As you can see, SPX has been a perfect 21=0 when looking out 20 days from the first CBI reading of 11+. Drawdowns have been sizable in some cases. Still, it appears a reading of this magnitude often suggests a washout is in progress that should set the stage for at least a multi-week bounce. We may not reach the “final” bottom here, but this study indicates we should see at least a temporary bottom form soon.

Free Webinar Today – Quantifiable Edges for Short and Long-Term Trading

Posted by Rob Hanna in Quantitative Study October 7, 2014

I am pleased to be able to say that I will be presenting a webinar this afternoon as part of Tradestation’s terrific “Spotlight On…” series. The topic is “Quantifiable Edges for Short and Long-Term Trading”. I’ll be discussing my approach to studying the market, some of my favorite timing methods, and how long-term indicators impact short-term timing performance.

The webinar is free. It will be held at 4:30pm EST this afternoon. To register you may use the link below:
https://tradestation.omnovia.com/register/33641409863723

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

Another Study Suggesting The Bounce Continues To Look Good

Posted by Rob Hanna in Quantitative Study October 6, 2014

I showed on Friday that the “weak” bounce coming off the 20-day low was not something to be frustrated about. More evidence along those lines triggered Friday afternoon with the following study:

2014-10-06 image1

Instances are a little bit low here, but the stats are compelling. I’d also note that all 11 of the instances that closed higher 4 days later did so by over 1%. So the intermediate-term low has often been a nice launching pad. Of course not everything is pointing higher right now. So it will be interesting to see how things play out. But this one narrow view suggests the bounce could have further to go.

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

The Perfect Record Of A “Weak” Reversal From A 20-Day Low

Posted by Rob Hanna in Quantitative Study October 3, 2014

On Thursday SPY put in a big reversal after hitting a 20-day intraday low. Still, it only closed up a mere $0.03, barely qualifying as an “up day”. In the subscriber letter I examined other instances where this kind of reversal has taken place. I looked back to the inception of SPY in 1993. Below are the results.

2014-10-03 image1

A bit low on instances, but the early indications here are very impressive. Traders may want to keep this in mind over the next couple of weeks.

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

After Bounces Quickly Fail

Posted by Rob Hanna in Quantitative Study September 26, 2014

Thursday quickly undercut Tuesday’s closing low and put an end to Wednesday’s bounce attempt. How has the market responded under similar circumstances in the past? For the study below, I look at times when a 20-day low was followed by a 1-day bounce and then another 20-day low (when above the 200ma).

2014-09-26 image1

The numbers here look very solid and suggest a bullish edge for Friday. In fact, the setup has done especially well in recent instances. Below I listed the last 18 trades.

2014-09-26 image2

17 of 18 winners is quite the streak. I will also note that the stats have been substantially less impressive when SPX has been below its 200ma. This edge has only been prevalent during long-term uptrends.

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

Sell Rosh Hashana and Buy Yom Kippur?

Posted by Rob Hanna in Quantitative Study, seasonality September 25, 2014

There is an old Wall St. adage that suggests “Sell Rosh Hashana. Buy Yom Kippur.” It implies that between those two holidays that the market often struggles. I looked back to 1998. First, a quick look at the general numbers. (Note – if either holiday was on a weekend then the Friday before was bought or sold.)

2014-09-25 image1

At first glance there appears to be a solid bearish tendency. But the total loss appears to be thanks to primarily 1 instance. Here is a look at all the trades.

2014-09-25 image2

2008 was the big standout here. I wondered what a profit curve might look like without 2008 included. Here is that.

2014-09-25 image3

Very choppy and it has gone effectively nowhere.

Overall, my impression is that there may be some truth to the adage. But the dates are variable. They often fall during times in which there is weak seasonality (like the Weakest Week – this week). So I don’t think there is a reliable trade here, but perhaps the potential weakness is worth keeping in mind.

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

SPY After Strong Closes For Weak Gains

Posted by Rob Hanna in Quantitative Study September 12, 2014

I’ve seen a few bullish studies in the last few days, but the study below is one with potentially bearish implications for Friday. It is one I have shown a number of times in the past. It shows that when SPY closes strong (in the top 10% of its range) but still only manages a small gain on the day, that the next day has exhibited a downside tendency. Stats are updated..

2014-09-12 image1

Good luck trading today, and have a great weekend!

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.