A Deeper Look At An Old Study Related To Friday’s VIX Action

Posted by in Quantitative Study, VIX January 28, 2013

Even with the SPX rising on Friday, the VIX managed to close up a bit. The VIX will typically trade in a direction opposite the SPX, so it is unusual that they both close higher. On Fridays, the VIX has a natural tendency to dip in the afternoon, so it is most unusual to see them both close higher on Friday. In the 12/3/12 blog I showed a stats table that suggested a decent downside edge based on this action.  It examined instances of the VIX and SPX both closing higher on a Friday while the SPX is in an uptrending market. Rather than update those odds with just the 1 extra instance, I have provided below a picture of a profit curve.  I don’t often show profit curves on the blog, but almost always share them in the Subscriber Letter.

Considering the fact that the study utilizes a long-term uptrend filter, the persistent downslope is quite impressive. The last instance once again put the equity curve at new lows.

Heads-Up Investing pointed out this study and a few others on his blog over the weekend.

Traders should keep in mind that the above study represents just one bit of influence that could impact the market over the next few days.  There are always crosswinds.  And while the weight of the evidence that I am seeing is pointing towards a short-term dip, strong momentum and liquidity could continue to push the market higher.

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MLK Week Historical Returns

Posted by in Quantitative Study, seasonality January 22, 2013

Martin Luther King Jr. Day was Monday. The NYSE has only observed MLK Day as a holiday since 1998. But over that 15 year period the market has not done well during MLK week.  I discussed this last year in the 1/17/12 Subscriber Letter.  Below is an updated chart with stats showing performance for the whole (4-day) week over time.

MLK week has exhibited a bearish tendency over the last 15 years.  The market has been strong lately, but if it is going to pull back this upcoming week could be an opportune time for the bears.

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Why Consistently Strong Closes May Not Be A Good Thing

Posted by in Quantitative Study January 16, 2013

The market has seen a lot of finishes near the top of its daily range lately.  When the market consistently closes near the high of the day it suggests optimism on the part of traders. This end-of-day optimism is now at a level that suggests it is overdone and there is a good chance of a pullback. The study below was last seen in the 8/21/12 blog and it exemplifies this concept. I have updated all of the statistics.

While the downside edge appears to remain in place for a full week, most of the edge has been realized over the 1st 2 days.

Note: To calculate the “8-day Average Closing % Range” I am simply measuring where in the daily range SPY closed each day. For instance if it traded at a low of $146.00 and a high of $147.00 and closed at $146.75, then it would have closed in the 75th percentile of the daily range. A close at $146.50 would have meant 50%.

I then take a simple moving average of the last 8 days. If that average goes from below 75% (where it usually is) to above 75%, the study is triggered.

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January Opex Weak

Posted by in Quantitative Study, seasonality January 14, 2013

As I discussed last month, opex week in December has historically been wonderful.  But January – not so much.  Below is a list of the last 14 January opex week returns.  While it is not the case this year, January opex week often occurs in conjunction with Martin Luther King Day. So some of these weeks contained four trading days and some contain five.

As you can see there has been a decided downside tendency over the last 14 years.  And despite last year’s strong performance the drawdown / run-up stats at the bottom remain especially compelling for the bears.

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2012 Was Another Strong Year For The Quantifiable Edges Big Time Swing System

Posted by in Uncategorized January 8, 2013
I’ve updated the Quantifiable Edges Big Time Swing System overview page with results through January 3rd, when the most recent trade closed out. There is not a trade currently open. Since the system only averages about 1 trade per month, I typically update the results bi-annually. Since the last update after July 2, 2012, through January 3, 2013, the signals produced a net return of 9.04% for SPY (including dividends, commissions of $0.01/share, and an assumed interest rate on cash of 0.1%).  This was achieved with 6 long-side trades and 0 short trades.  Five of the six trades made money.  The system is also again at new equity highs.  In total, 2012 posted a net gain of 9.12%, and 2013 is already up 2.51%.

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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Why the Persistently Low VXO is an Uh-Oh

Posted by in Quantitative Study, VIX January 7, 2013

Both the VIX and VXO (which is the old calculation for the VIX) closed well below their 10-day average for the 3rd day in a row on Friday.  This action in VXO triggered a study that I last discussed here on the blog on July 5, 2011 (though I have discussed it in the subscriber letter a few times since).  It looks for stretches of 15% or more below the 10ma that persist for 3 days.

Based on the stats table there appears to be a 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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1% Gaps Higher to Start the Month

Posted by in gaps, Quantitative Study January 2, 2013

Fiscal cliff news has the market set to gap up strongly this morning.  The 1st day of the month is often a strong one for stocks, but how has it done intraday when it gapped up big to begin with?  That is what I looked at this morning.

6 of the 9 instances since 2003 have closed above the open.  Gross gains have been about 2.2 times the size of gross losses, and the average trade rose a little over 0.4% from open to close.  But with instances low I wouldn’t put a lot of faith in these numbers.  Early indications favor more upside but it is certainly not a clear-cut edge.

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The Incredible Story (In A Picture) of the Last Day of the Year

Posted by in Quantitative Study, seasonality December 29, 2012

Last year in the 12/30/11 blog I showed that while the last day of the year used to be a bullish day for the market, that tendency has reversed this century. Below is an updated equity curve for the NASDAQ Composite on the last day of the year.

Closing up 29 years in a row is fairly astounding. Just as astounding is the abrupt end to the apparent edge.  I have no good explanation for why this may have changed, but it obviously has.

And that is something we always need to keep in mind. The market is constantly changing. It is important to always keep studying it, keep an open mind, and adapt as it evolves. Best to all in 2013! I hope it is a prosperous year for you and I hope Quantifiable Edges proves helpful along the way!

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What 100-day Highs In The VIX Could Imply For The Short-Term

Posted by in Quantitative Study, VIX December 27, 2012

The VIX is often referred to as the fear index.  When VIX levels are relatively high, that often suggests fear and uncertainty among market participants.  Relative highs can be measured a number of ways.  Often I will show VIX levels compared to short-term moving averages.  But an interesting study from yesterday’s Quantifinder looked at 100-day VIX highs that occurred when the SPX was not making 100-day lows.  In other words, relatively extreme fear in a market that is not making long-term lows.  The study was last seen in the 3/16/11 Subscriber Letter (click here for a free trial). I have updated it below.

The stats seem to suggest a bullish edge that persists for at least three weeks. Much of that edge is realized over the first 1-7 days.

And not only has this setup been followed by bullish inclinations over the time frames shown here, but it has also been a compelling overnight setup.  For details on the overnight implications check out today’s post on Overnight Edges.

Lastly, I also noticed this morning that Woodshedder posted a study based on the short-term VIX action last night which also appears to suggest a bullish edge.

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Twas 3 Nights Before Christmas (Again)

Posted by in Quantitative Study, seasonality December 21, 2012

Thursday’s close marked the beginning of the next seasonally strong period.  The study below is the “Twas 3 Nights Before Christmas” study, and I have shown it each year on the blog.  Results are updated.

The stats all appear quite strong.  I would note the “Max Losing Trade” column shows very mild numbers from days 1-8, with no decline being worse than 2.5%.  Of course the fiscal cliff appears to be getting us off to a rough start this morning, and we could be in danger of the worst “Day 1” of the study…

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The Most Wonderful Week Of The Year

Posted by in Quantitative Study, seasonality December 17, 2012

Over several time horizons op-ex week in December has been the most bullish week of the year for the SPX.  The positive seasonality actually has persisted for up to 3 weeks.  I showed this last year in the 12/12/11 blog.  I’ve updated that study below to include last year’s stats.

Even though last year failed to see a move higher during opex week the stats still appear extremely strong.

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An Updated Look At Intermediate-Term Highs Just Before A Fed Day

Posted by in Fed Study, Quantitative Study December 12, 2012

Today is a Fed Day. As I have discussed many times, Fed Days generally carry an upside tendency. But this tendency is greatly impacted by certain variables. A large collection of these variables may be found here on the blog under the “Fed Day”label. And many more may be found in the “Quantifiable Edges Guide to Fed Days”.


One variable I showed in September was whether the market was already at an intermediate-term high. Today I decided to updated that study.  This time I elected to show a stats table instead of the profit curve I showed in September.




No matter how you look at it, the intermediate-term high appears to take away the edge.

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1st 5 Day Low In Over 2 Weeks – QQQ Style

Posted by in Quantitative Study December 6, 2012

Yesterday I showed a SPY study that examined the 1st 5-day low in over 2 weeks. QQQ triggered its own version on Wednesday.  I showed the QQQ version last in the 11/12/10 subscriber letter.  There I found that the edge played out favorably below the 200ma but above it the edge was not apparent.  QQQ is below the 200ma, so here are the results from that 2010 study.

The numbers here appear very strong.

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