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:
Thursday was the 1st 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.
I am pleased to announce I intend to kick off 2023 with a new webinar for followers, “Using Elevated Interest Rates and Volatility for your Benefit”.
On Friday 1/13 at Noon EST, and then again Tuesday the 17th at 4:30pm I will be hosting a special free webinar where I will discuss an approach to utilizing current elevated interest rates in conjunction with VIX option models as a compelling strategy. Details can be found below.
Date and time: 1/13/23 at Noon (Eastern Time) & again 1/17/2023 – 4:30pm (Eastern Time)
If you would like a link to the recording of the webinar, simply register here. Recordings will be sent out Tuesday night.
Duration: 30-40 minutes + Q&A
Description: The webinar will cover the following topics:
The Lure of Treasuries
Why Treasuries & Certain VIX Options Strategies Complement Each Other so Well
A Couple Examples of Models Rob uses at Capital Advisors 360
I’ve posted and updated the “Twas 3 Nights Before Christmas” study on the blog here several times since 2008. The study will kick in at the close today (12/21). This year I will show the Russell 2000 version of the study. While all the major indices have performed well during this period, the Russell has been among the most consistent.
The stats in this table are strong across the board. An average year posted a gain of about 2.1% over the next 8 days. The note at the bottom shows the reliability of a bounce at some point has ben incredible. Traders may want to keep this study in mind over the next several days.
I’ve heard people saying recently that the typical 2nd half of December bullish tendency is unlikely to unfold this year. The theories suggest that the market is often up on the year. And people and institutions flush with profits tend to push it higher as the New Year approaches. There is also lots of buying chasing strong market returns heading into year end. But when it is a down year like now, players have losses, and less liquidity, and there is also tax-loss selling. All this creates selling pressure, so the bullish end-of-year turns bearish. I tested it. I looked at all other years since SPX inception in 1957 that SPX was down at least 12% (it is currently down 19%) on December 16th. If December 16th fell on a weekend, then it looked at the next trading day. The test bought on the 16th (or just after) and sold on the close of the 1st day of the New Year. Results below.
The theory sounded nice. I see no evidence that it is true. Eight of nine instances saw SPX move higher, and the lone loser only lost 0.15%. I see no reason to throw out seasonality studies this year just because the market is lower.
On Sunday 11/27 at 10:00am EST, and then again Monday at noon EST I will be hosting a special free webinar where I will preview some of the material and edges within the course and answer any questions you may have. Details can be found below.
Date and time: 11/27/2022 10am (Eastern Time) & again 11/28/2022 – 12:00 Noon – (Eastern Time)
We have decided to bring Black Friday back to Quantifiable Edges this year. 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, or the new VIX 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!
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The Quantifiable Edges Black Friday sale won’t last long, and it won’t be back for another year. To take advantage, simply use the link below now to sign up.
Note: Later this week I will be having the annual “Black Friday” sale, which is the only sale I run during the year. If you think you might be interested in a subscription, then now might be a good time to take a free 1-week trial and see if Quantifiable Edges would be helpful for you. Also this week we expect to release the new Quantifiable Edges VIX Trading Course! More to come on that…
The time around Thanksgiving has shown some strong tendencies – both bullish and bearish. I have discussed them a number of times over the years. In the updated table below I show SPX performance results based on the day of the week around Thanksgiving. The bottom row is the Monday of Thanksgiving week. The top row is the Monday after Thanksgiving.
Monday and Tuesday of Thanksgiving week do not show a strong, consistent edge. But the data for both Wednesday and Friday looks quite strong. Wednesday has had the most consistent gains (77.4%), and the largest average p/l of 0.3% ($301.88 on $100k.) Friday’s stats look fairly impressive, but it has not performed nearly as well over the last dozen years as it had previously. Meanwhile, the Monday after Thanksgiving has given back a good chunk of the gains that were realized on Wednesday and Friday. The worst “Monday After” came in 2008 with a 9% 1-day decline. Since then, Monday After performance has been basically breakeven.
The two big up days to start last week have now been followed by 5 down days in a row. And the 5-day selloff has put the NDX at a new bear-market closing low. The study below looks at other times since 1990 that NDX closed down for the 5th consecutive day and at a 150-day low.
These results suggest an upside tendency. Five days later all 11 instances closed higher, with the average instance up 4.14% and the median up 3.68%. But it is also notable that the gains were not achieved without some short-term pain. The average drawdown of the 11 instances was nearly 3.5%.
Bonds have had their worst year ever by many measures. And September has the potential to be the worst month ever for several bond ETFs and indices. Below I am going to show the worst months of all time for a few bond ETFs.
First, IEF, (iShares 7-10 year Treasury Bond ETF).
Four of the worst ten months ever for IEF occur in 2022 (so far).
Next, AGG (iShares Core US Aggregate Bond ETF)
Five of the worst ten months have come in 2022, including the 4 worst ever.
Lastly, let’s check out the US Treasury 1-3 yr Total Return Index going back to 1990.
Six of the worst 12 months ever have occurred this year. No other year has more than 1 month on the list.
If you feel like your bond investments have been beating you up month after month this year…you’re right.
Wednesday is a Fed Day. And a decent amount of the recent selling may be attributable to anxiety over the Fed announcement. I’ve shown Fed Days to be bullish in the past, especially when there has been a selloff heading into the Fed Day. The study below is from this past weekend’s subscriber letter. It looks at other times SPX closed at a 5-day low and below the 200ma on the day before a Fed Day.
The numbers are strongly positive, and as you can see, the setup really picked up steam starting in 2008. Below are the stats and list of instances from 2008 onward.
SPX would need to close below 3873 today in order to trigger this setup. For many more studies regarding Fed Days, check out the Fed Study category here on the blog.
While SPX and NDX posted small gains last Thursday, the Russell 2000 is now down 7 days in a row. I decided to examine past instances where RUT closed down 7 days in a row and under the 200ma.
If you were hoping that 7 consecutive down days put the market so oversold that it “had” to bounce, well, these results would be disappointing. Winners to losers has been basically 50/50 but the losers have been substantially larger. Below is a look at all the instances and their 4-day results.
Quite a few sizable declines in the mix here. The average drawdown over the 4-day period for all 18 instances was 4.6%, and the average run-up was 2.7%. In other words, volatility was high. Seven down days for RUT does not seem to assure us of anything, other than perhaps some additional volatility.
A couple of weeks ago on Twitter I shared a breadth thrust study that looked at times the % of SPX stock above their 50ma quickly rose from <= 15% to >= 90% within 50 days. The results I shared can be found below.
I noted the following in the letter after examining the results…but this appears to be yet another breadth study that we can add to the growing list suggesting an upside edge over the intermediate-term. Of the 17 instances that triggered since 1957, all of them saw the SPX higher 3, 6, and 12 months later.
I have received some questions and seen some discussion on Twitter about whether the recent tumble the market has taken meant the end of the breadth thrust signal. So I looked at it a couple of ways. I noted that Friday’s selloff caused the SPX to close at a 20-day low. I then looked at other times the market quickly reversed and posted a 20-day closing low after seeing a breadth thrust like those above.
There were only 3 instances that saw such a quick dive to a 20-day low after posting a similar breadth thrust. I never like to read anything into just 3 instances. So I expanded the time period to note any instance that closed at a 20-day low within 50 days. Those results are below.
Still just 12 instances, but also still no indication that the pullback would suggest the original study has been invalidated by the recent drop. While there are bearish studies and indicators out there, I see no good reason to throw out the original breadth study. Other instances where there have been pullbacks to 20-day lows after similar breadth thrusts have all been followed by gains 2, 3, 6, and 12 months later.
I will note that I did see a “breadth collapse” study that triggered last week suggesting more downside over the next month. I wrote about that in the subscriber letter. (You may take a free trial here if you wish to see it.)
So while the 50ma breadth thrust study still appears to be a positive looking out over the longer time-frames, there is contrasting evidence for the intermediate-term. Overall, that leaves breadth readings somewhat questionable. Perhaps we will see more clarity in the weeks to come.
The market had a pretty awful 1st half of the year. The SPX lost over 20% through June, which is something it had not done since 1970 during the 1st 6th months of a year. Out of curiosity, I decided to see how other strongly negative 1st halves performed during the 2nd half of the year.
Those are some impressive 2nd half results. I will note that 1970 is the only one in the bunch that managed to close the year positive, and it only saw a gain of 0.1% at the end of the year. (Remember, a 20% drawdown needs a 25% rebound just to get back to even.) But before we get too excited about these results, let’s also look at instances that did not quite meet the 15% criteria, but were down at least 10% in the 1st half of the year.
Results here are much different, with 5 of the 6 instances posting losses in the 2nd half of the year. Of course, this year fits in with the 1st group, so perhaps we get a nice rebound. But instances are low and its been 52 years since the last instance. So I am not incorporating this into my bias at all. Still, I thought the results were interesting enough to share.
The last two weeks have been quite a wild ride. The week ending June 17th was the worst 1-week decline for SPX (-5.79%) since March of 2020. This past week completely made up for that loss (despite it only being a 4-day week) with a gain of 6.45%. Below is a list of the 4 other times since 1930 that SPX followed the largest 1-week loss in a year with a complete reversal the following week.
1966, which is shown in the chart above, was the only other instance that the losing week was the worst in over 2 years. Results were overwhelmingly positive 1, 2, 3 and 4 quarters out for all 4 instances.
I don’t put a lot of faith in something that has only happened 4 times before, but if you are looking for a possible hopeful sign…well…this might be one.
For years I have published research about the Quantifiable Edges Capitulative Breadth Indicator (CBI). In fact, the 3rd blog post ever, back in Jan 2008, was about the CBI. On Friday, the CBI jumped from 7 to 11. Over the years I have generally regarded any reading of 10 or higher to be a bullish indication. The study below is one I have shown many times. It looks a performance following a spike to 10 or higher. I also added a 200ma filter.
We see that most often during established downtrends the high reading has marked a point where the selling is nearly over (at least temporarily), and bounce is likely to begin. The 17-day curve can be seen below.
That is solid consistency. It is a wild market we are in. Based on the spike in the CBI to over 10, it appears that there is a good chance that we’ll see a bounce, and perhaps some intermediate-term relief fairly soon. Plenty more CBI research can be found here.
A more detailed version of this study appeared in the Quantifiable Edges Subscriber Letter this past weekend, along with several others. Take a free trial here if you want to see it.
