Tuesday, November 16, 2010

Odds for the Dow on 11/17/2010

Category Prediction Rate % Correct Notes
Direction 15/19 79% 17/19 disregarding minor closing range
(losses were 0.30% and 0.65%)
Range 10/19 53% 14/19 disregarding minor closing range
Significant High/Low* no instances
Testing tomorrow
Next Day Gap** 3/5 60%
Gap Fill+ 1/1 100%
* A significant high/low occurs when the market makes a move greater than 0.5%. This test is measuring the following case: If the odds of a significant high/low are >= 70% in either direction, a significant high/low was made the following day.
** The next day gap determines if the condition correctly predicted the gap.The next day gap test is measuring times the odds of a positive low or negative high were >= 14%.
+ When the odds of a negative high/pos low <= 3% and the market gaps in the low odds direction, the gap fills.

  • Since the odds of a significant low tomorrow are over 70%, does the market makes a low lower than -0.5% from today's close?
I give the closing edge to the long side even though it's 50/50, since the most frequent closing range was positive, but it doesn't appear to be a big gain, therefore combining this with the significant low prediction, being short into today's close, closing them on weakness tomorrow, and reversing tomorrow into long positions when the market is below -0.5% and holding to the close would make some sense from the odds perspective.

Tomorrow I will be posting a comprehensive review of my observations about how this information can be incorporated into a trading system.

No comments:

Post a Comment