The S&P Probability Daily Analysis
Enviado: 4/2/2005 13:44Update for trading on Friday, February 4th, 2005
Probability = Slightly Down
Net Average = Down
1st Friday of February
% Days DOWN: 57%
Net Avg Move DOWN: $1,088
Days Occurred: 14
Avg UP day: 1,079
Avg DOWN day: 2,714
Avg DD in DOWN close: 381
Avg DD in UP close: 802
The stats working for tomorrow definitely have a downside flavor to them, especially since the net average move down is over $1,000. Personally, I like to see the probability a little stronger to the downside, but the difference in the average move higher and the average move lower still gives us a 2:1 profit potential even if the probability were 50%.
There is also another concern in that most of the bearish stats are based on a string of losers from 1999 through 2003 with this particular seasonal. Prior to that string, the probabilites were closer to breakeven with the net average and slightly bullish with the % direction. 2004 also saw the market moved notably higher at $2,450.
There is definitely a slant to the downside working, but because of the concerns mentioned, we will need some help from the market action before we can consider taking a short position Friday.
Pattern I
% Days DOWN: 56%
Net Avg Move DOWN: $369
Days Occurred: 120
Avg UP day: 1,423
Avg DOWN day: 1,788
Avg DD in DOWN close: 816
Avg DD in UP close: 978
The pattern is based on a reversal from the previous day's movement higher when today's high could not even meet the close. The overall tone is slightly on the bearish side. However, where the sheer strength of stats is missing, consistency fills the void. Every day of the week and every week of the month is net red with this pattern. And that includes a few bullish months. February is the most bearish month with this pattern:
February: 80% DOWN, Net Avg $2,156 DOWN
Friday: 56% DOWN, Net Avg $107 DOWN
Week1: 56% DOWN, Net Avg $275 DOWN
Fridays and week 1 are not overwhelmingly bearish, but all Fridays in February with this pattern have moved down. Further, most of the movement higher on Fridays have been in the last two weeks of the month regardless of the month. Fridays in week 1 are bearish with a net average down of $618 (all months). That net average for Fridays in February increases to $2,300 to the downside.
Taking a look at the open tomorrow does not really change the overall view one way or the other. In some cases, a higher open is more bearish for Fridays, but less bearish for week 1. A lower open is less bearish for week 1 and Fridays, but more bearish for February. Regardless, none of the stats were overwhelmingly different based on the open tomorrow.
SUMMARY - The potential move down that exists with the stand alone seasonals combined with the consistency of the current pattern to be followed by a down move definitely puts us in the bear camp once again. The only real caution with tomorrow's action is the fact that the % probability is not really that great at only slightly above 50/50 in most cases. However when the market has made a move down, it has consisently been larger than when it has moved higher, and that is the key behind taking a position tomorrow. Overall risk stats seem to point to normal levels.
NOTE - Traders need to have a solid grasp on the combination of the probability statistic and the net average statistic. The net profit of a 63% winning system that has a 1 to 1 win/loss ratio is almost the same as a 50% winning system with a 2 to 1 win/loss ratio. When looking at the net profit from that stand point, you understand that sometimes, it is just as profitable to participate in the lower probability trades that have shown larger moves in one direction than the other. That is the case with tomorrow's position.
Espero que seja útil
Cumprimentos,
Telmo
Probability = Slightly Down
Net Average = Down
1st Friday of February
% Days DOWN: 57%
Net Avg Move DOWN: $1,088
Days Occurred: 14
Avg UP day: 1,079
Avg DOWN day: 2,714
Avg DD in DOWN close: 381
Avg DD in UP close: 802
The stats working for tomorrow definitely have a downside flavor to them, especially since the net average move down is over $1,000. Personally, I like to see the probability a little stronger to the downside, but the difference in the average move higher and the average move lower still gives us a 2:1 profit potential even if the probability were 50%.
There is also another concern in that most of the bearish stats are based on a string of losers from 1999 through 2003 with this particular seasonal. Prior to that string, the probabilites were closer to breakeven with the net average and slightly bullish with the % direction. 2004 also saw the market moved notably higher at $2,450.
There is definitely a slant to the downside working, but because of the concerns mentioned, we will need some help from the market action before we can consider taking a short position Friday.
Pattern I
% Days DOWN: 56%
Net Avg Move DOWN: $369
Days Occurred: 120
Avg UP day: 1,423
Avg DOWN day: 1,788
Avg DD in DOWN close: 816
Avg DD in UP close: 978
The pattern is based on a reversal from the previous day's movement higher when today's high could not even meet the close. The overall tone is slightly on the bearish side. However, where the sheer strength of stats is missing, consistency fills the void. Every day of the week and every week of the month is net red with this pattern. And that includes a few bullish months. February is the most bearish month with this pattern:
February: 80% DOWN, Net Avg $2,156 DOWN
Friday: 56% DOWN, Net Avg $107 DOWN
Week1: 56% DOWN, Net Avg $275 DOWN
Fridays and week 1 are not overwhelmingly bearish, but all Fridays in February with this pattern have moved down. Further, most of the movement higher on Fridays have been in the last two weeks of the month regardless of the month. Fridays in week 1 are bearish with a net average down of $618 (all months). That net average for Fridays in February increases to $2,300 to the downside.
Taking a look at the open tomorrow does not really change the overall view one way or the other. In some cases, a higher open is more bearish for Fridays, but less bearish for week 1. A lower open is less bearish for week 1 and Fridays, but more bearish for February. Regardless, none of the stats were overwhelmingly different based on the open tomorrow.
SUMMARY - The potential move down that exists with the stand alone seasonals combined with the consistency of the current pattern to be followed by a down move definitely puts us in the bear camp once again. The only real caution with tomorrow's action is the fact that the % probability is not really that great at only slightly above 50/50 in most cases. However when the market has made a move down, it has consisently been larger than when it has moved higher, and that is the key behind taking a position tomorrow. Overall risk stats seem to point to normal levels.
NOTE - Traders need to have a solid grasp on the combination of the probability statistic and the net average statistic. The net profit of a 63% winning system that has a 1 to 1 win/loss ratio is almost the same as a 50% winning system with a 2 to 1 win/loss ratio. When looking at the net profit from that stand point, you understand that sometimes, it is just as profitable to participate in the lower probability trades that have shown larger moves in one direction than the other. That is the case with tomorrow's position.
Espero que seja útil
Cumprimentos,
Telmo