Successful Investing Trading Stocks Options Forex ETF's Futures Commodities Markets
Invest2Success "Profit Rockets" Stock Picks
Free Trial - Receive daily low-risk high-reward SP500 NYSE Nasdaq buy-long and short-sell stock picks that are experiencing increasing and decreasing earnings, that include buy sell entry, stop-loss, take profit area price targets, and trade management information to your email inbox.
August 27, 2014 - Y2K: S&P 500-Style by Dr Van Tharp Trading Education Institute
On Monday, August 25th, the S&P 500 cash index pushed through the 2000 price level for the first time in its history (hence the Y2K reference in the title). It was not able to close above that level, though it’s giving it the old college try as I write this. (Editor’s Note: After DR submitted his article yesterday on Tuesday, August 26, the S&P 500 did close above 2000 for the first time ever.)
Hitting this significant millennial milestone got my quantitative analysis juices flowing. The first question that came to mind probably occurred to a lot of other traders too, namely, “What typically happens after the S&P crosses a big round number milestone — is there a directional bias toward continued strength or is there a pullback first?” The results surprised me a bit. Let me know if they surprise you as well…
New Centennial Prices: What Happens Next?
Let’s jump straight into the data. In 1968, the S&P 500 cash index first crossed above 100. Here is the data for that and that instance as well as the next 17 times the S&P 500 touched a new multiple of 100.
Buying at the close of the day of the first touch of a 100 multiple and selling at the close of the next trading day:
Average Gain % / Average Loss % > 1.5
Those are pretty compelling numbers for making a one day trade, and it would have worked on Monday/Tuesday 8/25+26 as well.
More compelling from a probability perspective is what has happened in the 10 trading days following a touch of a 100 multiple:
Winners : 15
Losers : 4
% Winners: 79%
Average Gain % / Average Loss %: 1.1
The good folks over at paststat.com had the data up through the 1600 touch; I added in the remaining data pieces to arrive at these numbers.
S&P Y2K and Then?
The next steps in the market will be interesting. We are in the last unofficial week of summer with Labor Day and the return to school (and to the trading desk) coming up for many. This should bring more activity into the markets — we have had the two lowest volume days of the last several years this week, so look for more action as the number of market participants gets back to full strength.
With increased data, the piercing of the psychologically important 2000 price level should mean some follow through momentum to the upside for the S&P. However, we have to bear in mind that the data set we have to work with is relatively small and that outside news flow could impact the market direction at any time. In the absence of external market-moving events, the odds certainly favor some continued momentum.
As added food for thought, the numbers three months after the first touch of a 100 price multiple are compelling as well: 78 percent of the time, the S&P was up three months after touching a centennial level.
Van Tharp Institute
Investing Trading Home Study Programs & Live Seminars Workshops
Dedicated to cutting edge, high quality professional educational investing trading programs for traders and investors providing a road map for financial freedom. The finest investing trading education in the financial universe. Dr Van Tharp is one of the orginal Market Wizards, and referred to as the Traders Coach.
Stock Option Forex Futures Trading Seminars Webinars Workshops Events
Click Here For The Complete 2014 Schedule
Flipping Houses with No Money Free Webinar / August 30, 2014
OptionTiger Free Option Trading Webinar / August 31
CandleChart's Steve Nison Stock Market Strategy Webinar / September 01
Alpari Forex Trading Strategy Free Webinar / September 02
MetaStock Trading Software Free Training Webinar / September 02
AVATrade Free Forex Training Webinar / September 03
Dr. Van Tharp Peak Performance 101 Workshop / Sept 19 to 21, Berlin Germany
Morningstar Investment Conference / Nov 11 to 12, Mumbai India
Professional investors traders teaching successful low-risk high-reward investing trading strategies. Power secrets for stocks, options, futures, commodities investing trading success. Or avail of the Home Study Courses and the Trading Softwares available.
Steve Nisons Candlestick Charting Intensive Training and Software
for Profitably Trading Stocks Forex Futures Commodities
Use the CandleScanner trading software to automatically scan for profitable trading setups on any timeframe. Stock forex and futures candlestick trading courses to throughly understand how to profit from candlestick chart patterns. Free newsletter and live trading webinars. Steve Nison is the authority on trading and profiting using candlesticks.
Track n Trade CandleStick Auto-Recognition Plug-in
Quickly identify candlestick patterns without thinking. With Track 'n Trade, you have the ability to click, and select your favorite candle patterns, and have Track 'n Trade find, identify, and even auto-trade each signal through our famed Autopilot Trading System.