Friday, September 28, 2012

This Pattern Has Always Led to Higher Closes for SPY


The price action in SPY showed some real strength in that it gapped up, never filled, and closed above the open.  When the market is coming off an oversold level in an uptrend and is still not overbought, this pattern will often be followed by further gains.  This was shown in the subscriber letter last night (click here for a free trial).  And in the 5/22/12 letter I also showed that when the SPY pattern occurs following a short-term low it appears to provide a bullish edge, but when it occurs after an intermediate-term low then the bullish inclinations no longer hold true.  The current setup is bullish and I have updated the stats below.


The reliability and the size of the moves are both impressive.  This study suggests the rough start this morning is likely to be overcome in the next few days.

5 comments:

JKH said...

Rob, I don't quite follow you. You say that all 22 instances closed above the entry price at some point in the next week. But when I look at X-days 1-5 (or even 1 through 10), and look at the "Losing trades" column, there are no instances that show zero losers. So what am I missing?

James said...

JKH, Perhaps some of the early winners on days 1 and 2 become losers....Just guessing.

JKH said...

yeah, that's what I had thought, too. But, then, if that's the case, then there should be a column for "positive close 1-5 days out", or something to that matter, and in that, we'd see 22 winners.

Just a presentation issue. When making a big bold tombstone statement as was done, you should always make sure that your data above the tombstone shows what the tombstone proclaims.

Rob Hanna said...

Hi guys,

J-Trader is right. That statement is simply looking at how man instances made a close above the entry AT SOME POINT. It does not measure each individual instance.

I'd refer you to the 1st Post in the "Using Quantifiable Edges" series.

http://quantifiableedges.blogspot.com/2010/11/using-quantifiable-edges-to-your.html

There I state "Last but not least I will often place a statement with additional information in a box below the results. This is typically information that can’t be seen in the table. A common bit of information I put here is how often the market might close up (or down) from the entry price at some point in the next few days."

Another piece of info I might point out here is a hot or cold streak.

Best,
Rob

JKH said...

Thank you, Rob. That helps. Appreciate your time.
Regards
JKH