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Frank Hogelucht

Frank Hogelucht

Individual investor, trading for a living since 2007, taking a statistical approach in combination with historical market data and addicted to developing market-neutral algorithmic trading…

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A Strong Prelude...

The S&P 500 is up 4.52% year-to-date on Thursday, January 19, 2012, and provided that major market indices will not fall into a bottomless abyss on tomorrow's option expiration, the S&P 500 will be up +2.0% year-to-date on close of the final session of the 3rd week in 2012, which had significantly positive implications for the remainder of the year in the past.

Table I below shows the S&P 500 performance (since 1950) one week later, at the end of January ('at month's end'), and at the end of June ('5 month's later') and at the end of the year, followed by the percentage of days (of the remainder of the year) the S&P 500 was trading above and below the trigger day's close until year's end, in the event the S&P 500 was up 2.0%+ year-to-date on close of the final session of the 3rd week of a year.

The S&P 500 closed at an even higher level at the respective points in time (1 week, end-of-month, 30th of June and year's end) in 9 out of 10 years, and closed lower 1.0%+ 1 week, at the end of January and at the end of June only once (but up 1.0%+ in 12 and 18 years respectively), and at year's end in 2 years only, but up 1.0%+ in 20 out of 22 years.

Most remarkable, on average the S&P 500 was trading at a higher level 85.07% of the remainder (remaining sessions) of the year (and lower 14.93% respectively), therefore the trend was clearly up, and downside potential limited.

SPX.X down -1.0%+ year-to-date at the end of the 3rd week
Larger Image - SPX.X up 2.0%+ year-to-date at the end of the 3rd week

But what happend when the S&P 500 was down year-to-date at the same point in time?

Table II below shows the S&P 500 performance (since 1950) one week later, at the end of January ('at month's end'), and at the end of June ('5 month's later') and at the end of the year, followed by the percentage of days (of the remainder of the year) the S&P 500 was trading above and below the trigger day's close until year's end in the event the S&P 500 was down -1.0%+ year-to-date on close of the final session of the 3rd week of a year.

Performance over the remainder of the year was mixed at best, actually short-term negative, and more or less like a coin toss looking out at the end of June and at year's end.

SPX.X down -1.0%+ year-to-date at the end of the 3rd week
Larger Image - SPX.X down -1.0%+ year-to-date at the end of the 3rd week


Conclusion(s)

Probabilities and odds are still calling for some downside on tomorrow's option expiration, but if history provides any guidance, the S&P 500 ll probably remain on firm path over the course of the remainder of the year.

Have a profitable week,

 


Disclosure: No position in the securities mentioned in this post at time of writing.
(Short DAX German Aktien Index)

 

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