S&P and Seasonality

BarroMetrics Views: S&P and Seasonality

There are two seasonality periods, I have tended to rely on because both have proven to be consistent: the first are the stats surrounding Thanksgiving and the second are the stats surrounding the Xmas Rally.

Rob Hanna of Quantifiable Edges produced a day-by-day breakdown of the stat in 2010, see http://quantifiableedges.blogspot.com/2010/11/thanksgiving-week-tendencies-revisited.html

His stats showed that the Wed before, and the Friday after Thanksgiving, had a strong positive, bullish edge. Of the two, Wed had a slightly stronger edge. But yesterday, instead of heading North, the S&P headed South.

In today’s blog, Rob cites the 10 prior occasions¬† when the S&P closed lower on the Wed (see http://quantifiableedges.blogspot.com/). He did this to determine if the Friday edge persisted. He found that it did.

Now, while I do subscribe to quant studies, and like to check them out,¬† by ‘rely on’ I don’t mean I rely on the studies to automatically buy or sell. I use them more for context and on occasions, market timing. For example,

  1. The fact we did not bounce on Wed, provides clues that there is a directional bear wave building that is overcoming seasonal tendencies.
  2. If we don’t see a bounce on Friday, that will provide more evidence of this ‘wave’ idea.
  3. Finally, if on Monday, Nov 8 we see an acceleration down i.e. produce a day where we see:
  • a down close,
  • a True Range that is at or above 30 points and
  • Normalised Volume of at least 2,760,498,885.00,

that will provide me confirmatory evidence that the current low of 1074 (basis cash) will be breached and a test of 1100 to 1070 (basis cash) likely.

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