Other Ways to Use the Odds Table

As I continue to look at the odds table, I see additional ways the information could be used to make next day trading decisions. Another category could be tested based on something I saw in yesterday's table:

If the odds of a neg high/pos low are <= 3%, then any gap in that direction is likely fade-able

As you can see in yesterday's table, if there's a 3% chance that the market makes a negative high the next day -- or to think of it another way -- 97% of the time the market was positive at some point, you can be somewhat confident that any gap down the next day can be faded. Also, if the odds are for a down day and you're looking to short, getting short on a gap down is a bad idea. Better to wait for the market to make positive ground before considering a short.

I'll be adding a new category and making 3% the temporary threshold for that, assuming today gaps down and fills, which it looks like it will. This morning, I was up early and noticed the market was looking at a 40-50 pt gap down on the Dow pre-market before the GDP numbers came out. Then, after they came out, the futures recovered. This was sort of expected given that the odds of a runaway gap down were just 3%.

It's a reasonable conclusion, but we'll see if it works today to at least have a starting point for a test.