Saturday, December 29, 2012

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

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!

Thursday, December 27, 2012

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

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.

Friday, December 21, 2012

Twas 3 Nights Before Christmas (Again)

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…

Monday, December 17, 2012

The Most Wonderful Week Of The Year

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.

Wednesday, December 12, 2012

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

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.

Thursday, December 6, 2012

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

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.

Wednesday, December 5, 2012

SPY's 1st 5-day Low In 2 Weeks - What That Implies

On Tuesday the SPY closed at a 5-day low for the 1st time in over 2 weeks.  This triggered the study below, which I have shown numerous times before in the subscriber letter.

Results here suggest a moderate upside edge.

Monday, December 3, 2012

What Friday's VIX Actions Hints At (Revisited)

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. The study below was last seen a few months ago in 9/17/12 blog. It examines other instances of the VIX and SPX both closing higher on a Friday while the SPX is in an uptrending market. All stats are updated.

As you can see, there appears to be a decent downside edge suggested by this study. That edge primarily plays out over the first three days.