Possible Implications Of SPY Gap & Reverse Patterns The Last Two Days

Posted by in Quantitative Study September 8, 2014

Thursday saw the market gap up but reverse and close lower. Friday we had the opposite occur, with SPY gapping down but closing higher. It also closed at a new high on Friday, which triggered the study below.

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The numbers here are somewhat bearish, with much of the damage being done by day 2. Traders may want to give this study some consideration when evaluating the market’s prospects over the next day or two.

 

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Does Wednesday’s Big NDX Drop Hurt The Bull Case?

Posted by in Quantitative Study September 4, 2014

One interesting aspect of Wednesday’s action was that the NDX suffered its worst decline in at least 20 days while SPX made a 20-day intraday high. This is something I’ve looked at for subscribers in the past, but never shown on the blog. When I previously examined other instances I found little in terms of short-term implications, but the intermediate-term implications appeared strong. Below are updated results.

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Results here appear pretty strong throughout. The big NDX drop during an intermediate-term move higher for SPX has rarely derailed the rally. Most of the time it has been followed by additional gains.

 

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Labor Day Week When The Market Has Been Strong

Posted by in Quantitative Study, seasonality September 2, 2014

In past years I have shown that Labor Day week performance has often been poor when the market has rallied over the month (20 trading days) leading up to it. Below is a look at Labor Day week performance when the previous 4-week period has seen gains.

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This shows the poor performance record when there has been a rise in the market. Below is a look at the profit curve using a 4-day exit strategy.

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Definitely choppy. And the last couple of instances have seen gains during the week of Labor Day. But the overall downslope and evidence still has believing it is worth some consideration. (A strongly bullish performance this year could change my mind for the future, though.)

 

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Performance After 2 Unfilled Up Gaps & A 50-Day High

Posted by in Quantitative Study August 27, 2014

One interesting aspect of Tuesday’s action is the SPY gapped up above Monday’s close, and never filled that gap. This made the 2nd day in a row with an unfilled up gap. The study below is one I’ve shown before in the subscriber letter. It examined other times SPY left 2 unfilled up gaps and closed at a 50-day high. All stats are updated.

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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.

 

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A New SPX High With A Rising VIX To Start The Week

Posted by in Quantitative Study, VIX August 26, 2014

While the SPX closed up the VIX also rose. Most often they trade opposite each other, so this kind of action is somewhat unusual. But VIX has a tendency to decline going into the weekend (Friday afternoons), and then rise when it returns from the weekend. So to see this action on the first trading day of the week is less unusual than at any other time. Still, combined with the SPX 50-day high, it has been often followed by a dip in the next few days. This can be seen in the study below, which I last showed on the blog in May. Results are all updated.

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Results here appear squarely bearish for the 1-2 day time period. Traders may want to keep this in mind for the next couple of days.

 

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Performance After Fast Moves From A 50-Day Low To A 50-Day High For SPX

Posted by in Quantitative Study August 22, 2014

One amazing fact about the current rally is that Thursday’s 50-day high close came just 2 weeks after SPX closed at a 50-day low. That’s quite rare to see. The last time we saw a move from a 50-day low to a 50-day high occur so quickly was in October of 2011. The study below was originally published in the 10/17/11 letter and it examines such sharp moves. All stats are updated.

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There have only been 6 occurrences but the stats are overwhelmingly bullish over the next month. For those interested in exploring further, the dates were 8/1/61, 6/17/76, 8/20/82, 8/2/84, 6/24/98, and 10/14/11. Also notable but not shown in the stats above is that the average run-up of the 6 instances (5.4%) is over 5x the size of the average drawdown (1.0%) over the 1st 17 days. And every instance saw a run-up of at least 2x its drawdown.  Despite the low number of instances this study may be worth some consideration.

 

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SPX Performance After A Persistently Oversold VXO

Posted by in Quantitative Study, VIX August 18, 2014

Friday we again saw the VIX and VXO (the old calculation for the VIX) close well below their recent mean. Such stretches suggest a collapse in fear among investors. The study below was last seen in the 2/13/14 blog. It looks for stretches in VXO of 15% or more below the 10-day moving average that have persisted for three days.

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Based on the stats table there appears to be a short-term  downside inclination. I find the note at the bottom of the study to be especially interesting. Nearly every case has experienced an almost immediate pullback, but those that didn’t went without pulling back for a long time.

 

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When VIX Quickly Moves From Overbought To Oversold

Posted by in Quantitative Study, VIX August 14, 2014

After a few strong days you will often find some bearish studies appearing. But the Quantifinder provided no bearish evidence yesterday afternoon. Just the bullish one below. It considers the sharp drop in the VIX over the last couple of days after a sharp rise the previous few.

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The market condition that would typically accompany such VIX movement is one where you see SPX undergo a strong rebound from a sharp decline during a long-term uptrend, which is what we are currently looking at. Results over the first 2-3 days are not terribly consistent, but once you get out beyond that the bounce becomes more reliable and more powerful.

 

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Strong Bounces From Intermediate-Term Lows

Posted by in Quantitative Study August 11, 2014

I’ve been anticipating a bounce for a few days now, and this one seemed a little slow to arrive. But Friday put in a strong move, and we saw SPX go from closing at a 20-day low on Thursday to closing at a 4-day high on Friday. I decided to look at other times in which the market put in a strong thrust off a 20-day low. Here are the results.

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Day 1 is a bit iffy, but after that there appears to be a strong and consistent edge over the next 4 weeks. In the subscriber letter I looked at this study in a bit more detail. One thing I’ll note here is that without the 4-day high, up closes from a 20-day low still have a generally positive outlook. But the Avg Trade under those circumstances is about half what you see above for many of the time periods shown. Friday’s strong move up appears to be a positive.

 

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What Friday’s SPY Gap & Volume Action May Indicate

Posted by in Quantitative Study July 28, 2014

Not only did SPY leave an unfilled gap down on Friday, but it did so on relatively high volume. The study below, from the 1/13/10 blog, triggered. I took a new look and updated the stats.

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Implications here appear solidly bullish. We could see a bounce this week. Of course the Fed and other factors will also play in.

 

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What Thursday’s Solid VIX Rise Suggests About The Next Few Days

Posted by in Quantitative Study, VIX July 25, 2014

The study below is from last night’s Quantifinder. New readers may wonder why I use a day-of-week filter with this study. The VIX has a natural tendency to fall on Fridays and rise on Mondays. Because of this I typically separate out those days from the rest of the week when conducting VIX-based studies. This particular study looks at large (2.5% + ) mid-week rises in the VIX during times the SPX is closing at a 50-day high, like we saw on Thursday. All results are updated.

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Instances are a bit low, but the numbers are very lopsided and seem to suggest a downside tendency over the 1-4 day timeframe, with most of the damage being done in the 1st 2 days.

 

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Why Monday’s Selloff Could Lead To More Short-Term Selling

Posted by in Quantitative Study July 8, 2014

After closing at a new high on Thursday, selling was broad but not terribly deep on Monday as measured by the SPX. The study below, from the Quantifinder, examines these kind of situations.

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This type of broad, shallow selling will often lead to further SPX declines in the following days. Risks appear to far outweigh potential rewards when looking at metrics such as win/loss ratio and profit factor. The downside edge plays out quickly though, and has generally exhausted itself after the first couple of days.

 

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QE Big Time Swing System Stays Strong In 1st Half of 2014

Posted by in System July 7, 2014

I’ve updated the Quantifiable Edges Big Time Swing System overview page with results through June 30. There have been no trades since then. The system only averages about 1 trade per month, so I typically update the results bi-annually. The QE Big Time Swing System has been on a roll in 2014. It has had 6 trades. Five of these trades have been to the long side, and one short. One of the long triggers was a loser and the rest posted gains. The signals produced a net return of 7.18% for SPY (including dividends, commissions of $0.01/share, and an assumed interest rate on cash of 0.1%). The system also continues to make new equity highs.

The Big Time Swing System provides easy to follow mechanical rules. The standard parameters are not optimized and have performed quite well (they are the ones used for all performance metrics). There are only about 11 trades per year averaging 7 trading days per trade. All entries and exits are either at the open or the close. And to be sure you have everything set up properly traders may follow the private purchasers-only blog that tracks all SPY signals and possible entry/exit levels. This service is free for 12 months from the date of purchase.

For system developers looking for a system that they can use as a base to build their own system from, the Big Time Swing is an attractive option. It is all open-coded and comes complete with a substantial amount of background historical research. And since it is only in the market about ¼ of the time, it can easily be combined with other systems to provide greater efficiency of capital. Once you’re ready to try and improve the system yourself you can also refer to the system manual or the August 2010 purchaser-only webinar – both of which discuss numerous ideas for customization.

For more information and to see the updated overview sheet, click here.

If you’d like additional information about the system, or have questions, you may email BigTimeSwing @ Quantifiable Edges.com (no spaces).

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What SPY’s Gap & Reverse Pattern The Last 2 Days Suggests About Today

Posted by in Quantitative Study June 30, 2014

The way SPY has gapped and reversed the last couple of days triggered the below study in the Quantifinder. I updated all the stats.

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The edge isn’t huge but risk/reward has seemed to favor the bears under these circumstances. Much of the downside has been realized by the end of day 1.

 

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