Saturday, December 11, 2010

NASDAQ up 8 Straight Days: What Happens Next?

Well, the NASDAQ is up 8 straight days again. It just happened at the end of October and I took note of it then (NASDAQ and VXN Rising). Heck, it's happened 3 times in the last 4 months! Below is the table I created before, updated for results from October's 8 day run.


When NASDAQ rises 8 consecutive days, buy on close > 200 day MA; sell 'n' days later. $100,000 per trade; 1995 to present.
Net Profit
# Trades
# of winners
% of Winners
Max. Trade % DD
Avg % P/L
W. Avg. Profit
L. Avg. Loss
Profit Factor
Payoff Ratio
1
         173.76
19
9
47.37
-1.78
0.01
       732.99
         (642.32)
1.03
1.14
2
   13,513.67
16
13
81.25
-1.74
0.84
   1,243.14
         (882.38)
6.10
1.41
3
   11,603.93
15
12
80
-2.21
0.77
   1,294.41
     (1,309.66)
3.95
0.99
4
   13,645.19
14
11
78.57
-3.92
0.97
   1,772.13
     (1,949.40)
3.33
0.91
5
   17,545.01
14
10
71.43
-4.13
1.25
   2,329.08
     (1,436.46)
4.05
1.62
6
   14,983.11
14
9
64.29
-5.55
1.07
   2,428.00
     (1,373.78)
3.18
1.77
7
     8,860.98
14
9
64.29
-6.14
0.63
   2,201.45
     (2,190.41)
1.81
1.01
8
     8,566.31
14
10
71.43
-9.78
0.61
   2,282.32
     (3,564.21)
1.60
0.64
9
   16,546.11
14
10
71.43
-9.78
1.18
   2,537.68
     (2,207.68)
2.87
1.15
10
   21,010.27
14
12
85.71
-9.78
1.50
   2,322.41
     (3,429.31)
4.06
0.68
11
   22,990.34
14
11
78.57
-9.78
1.64
   2,938.34
     (3,110.48)
3.46
0.94
12
   24,298.26
14
11
78.57
-11.35
1.74
   3,641.58
     (5,253.04)
2.54
0.69
13
   30,096.14
14
11
78.57
-11.35
2.15
   3,889.58
     (4,229.75)
3.37
0.92
14
   34,845.13
14
13
92.86
-11.35
2.49
   3,366.81
     (8,923.42)
4.90
0.38
15
   38,292.06
14
13
92.86
-11.35
2.74
   3,565.86
     (8,064.18)
5.75
0.44
16
   38,700.56
14
13
92.86
-11.35
2.76
   3,626.24
     (8,440.53)
5.59
0.43
17
   35,634.69
14
11
78.57
-11.35
2.55
   4,287.54
     (3,842.76)
4.09
1.12
18
   42,635.35
13
11
84.62
-11.35
3.28
   4,740.23
     (4,753.60)
5.48
1.00
19
   37,995.77
13
12
92.31
-11.35
2.92
   4,021.82
   (10,266.03)
4.70
0.39
20
   40,987.73
13
12
92.31
-11.35
3.15
   4,322.38
   (10,880.84)
4.77
0.40


The NASDAQ likes to just keep melting up when it gets like this. Hard to believe, but the numbers don't lie (at least not too often.)

Right now, I'm more interested in what will happen next week. Looking at the last 4 times the NASDAQ was up 8 straight days, here's how it fared over the next 5 trading days.


Return 1 - 5 days after the 8th straight up day
Date
1
2
3
4
5
5/24/2005
-0.56%
0.47%
0.68%
0.32%
1.27%
7/17/2009
1.20%
1.57%
2.11%
4.61%
4.21%
9/17/2010
1.74%
1.46%
0.82%
0.50%
2.83%
10/29/2010
-0.10%
1.04%
1.31%
2.79%
2.85%






MAE 1 - 5 days after the 8th straight up day
Date
1
2
3
4
5
5/24/2005
-0.57%
-0.95%
-0.95%
-0.95%
-0.95%
7/17/2009
-0.68%
-0.68%
-0.68%
-0.68%
-0.68%
9/17/2010
-0.60%
-0.60%
-0.60%
-0.60%
-0.60%
10/29/2010
-0.10%
-0.64%
-0.64%
-0.64%
-0.64%






MFE 1 - 5 days after the 8th straight up day
Date
1
2
3
4
5
5/24/2005
0.04%
0.47%
0.68%
0.74%
1.27%
7/17/2009
1.20%
1.63%
2.11%
4.61%
4.92%
9/17/2010
1.74%
1.87%
2.21%
2.21%
2.83%
10/29/2010
0.52%
1.04%
1.31%
2.79%
2.88%


Note

MAE = Maximum Adverse Excursion. This is the highest intra-day loss incurred.
MFE = Maximum Favorable Excursion. This is the highest intra-day gain incurred.

If this instance plays out like the last 4, we shouldn't expect to see an intra-day loss on the NASDAQ greater than 1%. And if you wanted to sell into strength, the index reached some intra-day gain each time. But there are other factors to consider...

We have POMO, a Santa Claus rally and a wall of worry: we're going up, right? We also have ultra bullish sentiment indicators (too much is bad), high % bulls vs bears, put/call ratios, breadth divergences (not even sure if this is bad) and other  overbought indicators abound: we're headed lower, right? We're in a bull vs bear battle heading into year end. The markets are a tough game. This should be interesting.

Good trading out there.

1 comments:

Mike said...

Appreciable post! You shared brilliant idea of building a trading system by blog posts. I liked your idea. You have written very informative post. Many thanks to you!
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