Opening Quote as a Sentiment Indicator
By
Rennie on Tuesday, September 14th, 2010 at 1:49 am
Unusual session Monday with very negative NYSE TICK action accompanying an essentially flat day (S&P futures +1 from open). TICKscore closed at -33, with the cumulative version threatening to break out of its month-long trading range to the downside. Cumulative TICK closed at -115,000, its second-worst close since the May ‘flash crash’. Note from my twitter updates that recent closes in excess of -50,000 on an up day for the S&P have led to unusually volatile conditions looking out two trading days. Interestingly, the fact that Monday represented the fourth consecutive session with an up open argues in favor of a mild day on Tuesday with a modest upside bias. Listed below are each of the last 30 instances in which the front-month S&P contract initially opened higher four days in a row…
S&P Futures Open Up Four Consecutive Sessions
09/13/10… S&P futures ??? next session
07/26/10… S&P futures +0.1% next session
07/08/10… S&P futures +0.5% next session
06/10/10… S&P futures +0.5% next session
03/30/10… S&P futures -0.4% next session
03/19/10… S&P futures +0.5% next session
03/03/10… S&P futures +0.3% next session
02/02/10… S&P futures -0.1% next session
12/23/09… S&P futures +0.6% next session
12/14/09… S&P futures -0.4% next session
09/09/09… S&P futures +0.9% next session
06/01/09… S&P futures +0.4% next session
03/13/09… S&P futures -0.1% next session
12/26/08… S&P futures +0.2% next session
07/28/08… S&P futures +2.2% next session
07/21/08… S&P futures +1.0% next session
05/15/08… S&P futures +0.1% next session
04/28/08… S&P futures -0.5% next session
03/24/08… S&P futures -0.0% next session
02/14/08… S&P futures +0.0% next session
01/29/08… S&P futures -0.8% next session (*)
12/12/07… S&P futures -0.1% next session
11/28/07… S&P futures +0.1% next session
07/17/07… S&P futures -0.3% next session
07/05/07… S&P futures +0.5% next session
06/18/07… S&P futures +0.2% next session
05/25/07… S&P futures +0.3% next session
05/03/07… S&P futures +0.4% next session
04/03/07… S&P futures +0.1% next session
03/26/07… S&P futures -0.3% next session
09/01/06… S&P futures +0.2% next session
This study is using the opening quote as a sentiment indicator of sorts. The performance figures in the table above are for the following day, not the day of the open. Note that the bullish overnight sentiment tends to persist over the short-term. In only one case out of thirty (3%) did the S&P close down more than 0.5% the next day, significantly below the 26% random chance for a 0.5%+ loss in the same time frame. The market didn’t usually rally much either. In only four cases did the S&P close up more than 0.5% the next day, meaning 83% of the time the S&P finished +/- 0.5% or less. The random chance for a one-day absolute change of 0.5% or less is 44%, indicating the initial appearance of four up opens leads to a much higher-than-average chance of a flat-to-up day.
Opening Quote as a Sentiment Indicator
By Rennie on Tuesday, September 14th, 2010 at 1:49 amUnusual session Monday with very negative NYSE TICK action accompanying an essentially flat day (S&P futures +1 from open). TICKscore closed at -33, with the cumulative version threatening to break out of its month-long trading range to the downside. Cumulative TICK closed at -115,000, its second-worst close since the May ‘flash crash’. Note from my twitter updates that recent closes in excess of -50,000 on an up day for the S&P have led to unusually volatile conditions looking out two trading days. Interestingly, the fact that Monday represented the fourth consecutive session with an up open argues in favor of a mild day on Tuesday with a modest upside bias. Listed below are each of the last 30 instances in which the front-month S&P contract initially opened higher four days in a row…
S&P Futures Open Up Four Consecutive Sessions
09/13/10… S&P futures ??? next session
07/26/10… S&P futures +0.1% next session
07/08/10… S&P futures +0.5% next session
06/10/10… S&P futures +0.5% next session
03/30/10… S&P futures -0.4% next session
03/19/10… S&P futures +0.5% next session
03/03/10… S&P futures +0.3% next session
02/02/10… S&P futures -0.1% next session
12/23/09… S&P futures +0.6% next session
12/14/09… S&P futures -0.4% next session
09/09/09… S&P futures +0.9% next session
06/01/09… S&P futures +0.4% next session
03/13/09… S&P futures -0.1% next session
12/26/08… S&P futures +0.2% next session
07/28/08… S&P futures +2.2% next session
07/21/08… S&P futures +1.0% next session
05/15/08… S&P futures +0.1% next session
04/28/08… S&P futures -0.5% next session
03/24/08… S&P futures -0.0% next session
02/14/08… S&P futures +0.0% next session
01/29/08… S&P futures -0.8% next session (*)
12/12/07… S&P futures -0.1% next session
11/28/07… S&P futures +0.1% next session
07/17/07… S&P futures -0.3% next session
07/05/07… S&P futures +0.5% next session
06/18/07… S&P futures +0.2% next session
05/25/07… S&P futures +0.3% next session
05/03/07… S&P futures +0.4% next session
04/03/07… S&P futures +0.1% next session
03/26/07… S&P futures -0.3% next session
09/01/06… S&P futures +0.2% next session
This study is using the opening quote as a sentiment indicator of sorts. The performance figures in the table above are for the following day, not the day of the open. Note that the bullish overnight sentiment tends to persist over the short-term. In only one case out of thirty (3%) did the S&P close down more than 0.5% the next day, significantly below the 26% random chance for a 0.5%+ loss in the same time frame. The market didn’t usually rally much either. In only four cases did the S&P close up more than 0.5% the next day, meaning 83% of the time the S&P finished +/- 0.5% or less. The random chance for a one-day absolute change of 0.5% or less is 44%, indicating the initial appearance of four up opens leads to a much higher-than-average chance of a flat-to-up day.