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Intraday seasonality – 15 minutes anatomy of a day in the stock market

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Where are the intraday stock market edges? When should a trader be long or short?

Well, those aren’t easy questions. Intraday seasonality does exist. You can have a look at an example study here. This analysis goes back to 1997 and stops at 2015.

Here I’m writing down a simpler approach: I’m splitting the the stock market session in 15 minutes different periods and see what’s happening with them. I have data back to 28 September 2009: last 10 years of data exactly. Intraday data are very difficult to handle, that’s why I’m focusing only on the last 10 years; there’s enought evidence on the study mentioned above of the other years more back in the past stock market behaviour. I’m backtesting the ES future market.

Let’s have a look at this quarter: 8:30 – 8:45 AM EST.

The equity curve below shows a mildly bearish edge. 

That’s an edge, nothing more. You cannot trade it alone, but whatever intraday systems you’re dealing with, it’s worth considering.

If you had traded all those quarters of an hour at 8:30 AM EST blindly, you would have lost about 8% on ES futures contract during the last 10 years.

8-30 8-45

I’ll be back soon with another intraday seasonality study,

Marco Simioni

Nightly Patterns

 

 

 

Nightly Patterns auto-trading is coming!

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I am pleased to announce new auto-trading service for Nightly Patterns!

It was missing, but now we have the answer: Striker Securities. For those of you who just like to see the money flows!

Striker Securities, Inc, market leader in financial services since 1990’s will be Nightly Patterns introducing broker and main reference for auto-trading.

The first trader approaching this new service will benefit from reduced starting commission and a first free month subscription.

If you are interested in auto-trading Nightly Patterns trades, just write me at:

nightlypatterns@hotmail.com

Marco Simioni

Has the big bear stock market begun?

TEST ZONE

“It’s all about imperfect simmetry.”

Let’s go on. You can read the previous article here.

Is the big broadening pattern going to be completed with a big fall down at least to 2200 or 2100 price zone of the Emini future?

Well, it’s not easy to answer the question. But there’s another interesting pattern forming right now: it’s a perfect rising head and shoulder. You can see the blue neck line at 2810 price zone.

That’s a tremendous reaction price zone. I circled in blue all the time that zone has been tested, both rising from below and falling from above. That price zone is a key level.

I added 4 blue vertical lines to outline the lows of the head and shoulder formation. When the 2 lows width is similar, the odds the head and shoulder triggers are very high. That’s the case, as you can see from the picture.

Are stock markets in troubles? Yes.

We have a US Presidential Impeachment procedure starting, monetary markets problems on Repos with the Fed pumping billions of dollars to keep equilibrium and all the big problems I mentioned in the previous article

I could be wrong… It’s not easy to time the tops. Let’s see.

That’s all folks!

Marco Simioni

Nightly Patterns

Northmantrader’s, Banana3 and mine view on the stock market

Stock markets are in trouble.

My view on the markets outlined here, was confirmed on August with Treasuries yield curve inversion. This is a very old and effective recession forecaster. Another good ingredient for our stock market crash recipe.

Another great trader, Sven Henrich, explained current stock market pattern in one CNBC interview:

Northmantrader.png

On that interview, he shows my same view on the stock market. It looks great!

Another trader, Banana3 on Stocktwits, strongly argues against Sven’s and mine forecast.

Basically here’s his theory:

Banana3.png

From his perspective, we should see a third break and up trend.

Well, it looks like both previous instances broke up. As this pattern can break up or down, I think the third time is the right time. That’s where the stock market waits for us for breaking down.

Marco Simioni

Nightly Patterns

50% stock market retracement!

MONTHLY CHART

“Nobody cares about the monthly bar chart.”

If we look at the monthly chart above we can clearly see how from the current stock market top (Emini chart) of 3029.5 to 2007 high of 1586.75 and 2000 high of 1574.25 there’s about 50% difference (calculated on last market high of 3029.5).

Why should we see the market down that far?

Well, there are 5 great technical and fundamental reasons:

1 – The most strong support in the monthly chart is on those 2 great monthly highs mentioned above (it took 13 years to break that resistance, from March 2000 to May 2013).

2 – The trend line that starts from 2009 lows and had been touched in 2011, 2016 and December 2018 should be broken. Nearly all trend lines must be broken in technical analysis. This is a tremendous attraction factor.

3 – 50 day SMA must be broken someday. This is another tremendous attraction factor.

4 – There’s a great broadening pattern forming since January 2018. This should trigger the next big market movement.

5 – RSI5 indicator has a very steap bearish triple divergence triggered. Odds that these divergences break up are very little as we would need a steep long RSI5 trend like that one from October 2016 to January 2018. That’s too recent for the start of another one.

6 – Looking at fundamentals, S&P500 stocks are at least 30% overpriced. 20% more downside potential need to creat an oversold stocks regime.

7 – Last, I think the world entire stock and bond market is already in the Krugman’s liquidity trap. Why should the Fed cut rates while the stock market has been collecting new highs month by month? With future negative interest rates and quantitative easing back on our shoulders, I think at the end we shall see the famous Fridman’s Helicopter Money in action…

I could be wrong… It’s not easy to time the tops. Let’s see.

That’s all folks!

Marco Simioni

Nightly Patterns

 

 

Nightly Patterns on Traders’ Magazine webinar!

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I am pleased to announce a very interesting webinar on Nightly Patterns!

I want to thank Maurizio Monti, experienced trader and editor at Traders’ Magazine for holding this great webinar!

Only for italian speakers!

Vi aspettiamo questa sera:

Martedì 23 luglio alle 18, su Borsa Webinar

Marco Simioni

Nightly Patterns

Equity curve timing with Bollinger Bands

BIG ENTRIES

“Once a year…”

Many traders ask me when it’s better to start trading a system, or when may they start trading Nightly Patterns.

That’s a very hard question. I feel good when we are earning and winning like everybody else in the world. Anyway, when the equity curve of a system makes new highs it’s not the best time to start or increasing equity exposure.

The best time to start trading a strategy is at its drawdown bottom. But how can we fix it?

I tried moving averages, linear regression, and Bollinger Bands. Bollinger Bands looks to be the most effective on timing Nightly Patterns equity curve. I went back to Nightly Patterns inception in October 2012. We trade ES future,  but I considered SPY in this backtest because I use it for searching new patterns and getting trade signals (that’s why it’s only 37% cumulative return since 2012 in the chart).

Here’s the legend of the chart above:

  • Blue line – Cumulative SPY Nightly Patterns % returns equity curve
  • Yellow line – 20 SMA of the Blue line
  • Green line – 3 standard deviations above band
  • Red line – 3 standard deviations below band

Well, I highlighted with a grey circle the 5 times Nightly Patterns equity curve have touched the red Bollinger Band.

Now we are right in the 5th time, so if you are waiting outside the lines, now it’s a great time to start! (or to add equity exposure…) This is a “once a year” big chance!

Marco Simioni

Nightly Patterns

Micro E-mini Futures launch!

“Somebody must come in… We want them to play here!”

“CHICAGOMay 6, 2019 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace, announced the successful launch of its new Micro E-mini futures on the S&P 500, Nasdaq-100, Russell 2000 and Dow Jones Industrial Average indexes, which became available for trading today.”

It’s great to have such a small tradable ES future. It makes it easier to adjust positions and it leads us to much more effective money management strategies.

Let me ask an easy question: what’s happened last year (December 2017) after Bitcoin futures were introduced in the CME board? Well, when big amounts of new liquidity comes in a market the potential volatility increases dramatically.

If there’s a bubble, the bubble bursts!

Let me ask another question: what’s happened on September 1997 when the E-mini futures were created? Well, there wasn’t a bubble.

Smaller futures contracts mean that many small traders can now affort to enter the market, both long or short. They are always doing the wrong thing. Buying greed and selling fear. On the contrary, big hands, institutional traders and investors, do the right thing.

When small traders came in late 1997, they helped to create the Dot-Com Bubble, because we were not in a bubble.

In late 2017, during the last Cryptos markets big bubble, big hands coming in recognised the too big bubble and made it burst shorting futures. The panic started and small cryptos traders started to sell their cryptos for what it has shown to be something like a 90% bear market in cryptos.

What’s happening now with the launch of the new Micro Mini Futures contract? Where are the big hands in the stock market? They’re already long since 2009. The day of the announce is very close to the all time stock market highs. They have been in the market for more than 10 years now. And they are looking to get out of it. Somebody else (small traders) will be long for the next big bear market coming.

Just another story. Let’s see the future”s” markets!

Marco Simioni

Nightly Patterns

 

 

 

 

Nightly Patterns vs stock market correlation

I wrote last week a post on intraday versus overnight stock market correlation. You can read it here. There’s a further step now: investigating on Nightly Patterns returns vs stock market daily returns.

Is Nightly Patterns doing better than simply entering all nights explored on the last article in terms of correlation?

And second question: is Nightly Patterns doing better of just entering all days in the market (like a buy and hold strategy) in terms of correlation?

The main problem to deal with is that Nightly Patterns doesn’t trade all nights. It only trades on average 1.5 trades per week. How can it be compared to daily stock market behaviour?

Simply comparing monthly returns of Nightly Patterns (trading SPY instead of ES or Emini) and SPY monthly returns.

That’s an easy magic trick!

Here’s the big magic number: -0,1865

Correlation is more than 10 times negatively correlated than last article’s one! This results is due to the high selective power of Nightly Patterns.

And what I like most, if you look at the chart above you can see that the correlation is always below 0. Furthermore, in the last few years it has been steadily around its average of -0,1865. Here we are!

Marco Simioni

 

 

Overnight vs Intraday stock market correlation

“Why should a trader approach overnight trading?”

Before looking at potential high returns, I would answer:

“Because of its correlation to intraday stock market movements!” I would reply.

What does it mean? The greatest strategies or systems to add to a portfolio of strategies or systems are those uncorrelated or negatively correlated to the general performance of stock markets. This is the only way to unveil the Shannon’s Demon. Especially those uncorrelated to the intraday stock market returns. One of the best proxy for the stock market is the SPY etf.

Here’s the big number: -0,017

That’s the correlation between all nights and all intraday returns since SPY inception in 1993. It’s slightly below zero. It means the overnight session is not correlated at all with the intraday session. It’s like a two uncorrelated stocks portfolio!

That’s all folks!

P.S. In the chart above, intraday returns are on X asses and overnight returns are on Y asses.

 

 

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