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Friday, March 8, 2013

6 Consecutive Green SPY Days

Welp, we just experienced six straight green candles on the SPY... I know the odds are very favorable for a red day to follow six green days from my trading experience - its like it is engrained into my zombie trading brain. I've always remembered that number 'six', because it is the devil's number. On top of this devil's number of green days, the next trading day is also a Monday (as all but one in 2013 have been red). So, I thought I would try to back up my devil's number theory with some research, so that I can sleep soundly this weekend with my heavy short SPY position in tow. I thought it was interesting:

Looking back in recent SPY history (2 years), here are the three instances I found - from most recent to oldest:

1.  January 17-25, 2013, we moved from a low of 147.43 to a high of 150.25, which is where we closed. We advanced 3% in 6 trading days. The seventh day was red with a low of 149.51, and a close of 150.07. At the lowest, we traded 0.5% lower than the 6th day's close. The next few days were relatively flat, followed by more buying, peaking at 153.28 before significantly selling off.

2. December 5-12, 2012, we traded from a low of 140.37 to a high of 144.55. We ended the 12th at 143.31. Bottom to top gain was roughly 3% in those 6 days. The following trading day was red, with a low of 142.27, and a close at 142.63. At the lowest, we traded 0.7% lower than the previous close. The next day was also red, followed by significant 3% surge up, proceeded by a larger 4.5% pullback.

3. August 3-10, 2012, here we migrated from 139.49 to 140.89, with a 6th day close at 140.84. It was a 1.1% move in 6 days. I really didn't want to include this in the study, because August trading is so worthless and weak, but I digress. The seventh day was red with a low of 140.04, or 0.6% lower than the previous day. It closed at 140.77. The next days/weeks we turned sideways, and then higher.

AVERAGE of the above vs current 6 day streak:

-6 day advance:  2.4% ave. vs 3.5% in our current run


-Average % from the previous day close to the seventh day's low: 0.6%
-Average points from the previous day close to the seventh day's low: 0.86 SPY points
-Average closing % of the day from previous day: 0.22% lower
-Average closing points of the day from previous day:  0.31 SPY points

So, what does this tell me?

I am expecting a red Monday. We closed today near the highs at 155.44. A 0.6% pullback from there would be 154.50. The exit range for my shorts will be in the 154.35 - 154.65 range. I expect some upward turning after this, and then a bigger selloff.

Hope this helps!


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