Knockin’ On Heaven’s Door

We are starting the week with the E-Mini futures in shouting distance of our current all time highs at 3154.26 on the S&P 500 cash. So what are the odds of breaching them this week? I’ll come right out and tell you that the odds unfortunately are not very good. Let’s review:

Here’s where we are on the E-Mini pre-market with a little under an hour before the open (by the time you read most likely near the open). The ATH on the E-Mini futures stands near 3158 but it happened after hours at around 4:00am EST on 12/2 and not on 11/28 as on the SPX.

That particular high stands at ES 3155, therefore let’s go with that one as our baseline. I just glanced at the live chart of the E-Mini and it’s ticking near 3142 and that puts us about 12 handles below the theoretical ATH on the E-Mini. I could adjust that one for fair value (PREM) but let’s just call it a bit over 10 handles until we reach the stairways to heaven.

Not a big climb during a bullish month, unfortunately the historical stats don’t look overly supportive of not only breaching those highs but – more importantly – holding them after the fact.

The Sharpe ratio for week #50 is a negative 0.14, so let’s see if this is the norm or if a few large outliers are spoiling the stats.

OUCH – 42% positive means 58% negative. Not strong odds either way but not a week I’d be betting on black just based on statistics.

Trading range looks pretty normal – note that we basically have this and the next week until participation literally drops off the cliff as everyone heads out for their EOY vacations.

Here are all the #50 weeks since 1950. Not looking so hot there to be honest. In fact the odds are probably bolstered by several large positive outliers, otherwise the stats would be really ugly. Which is interesting for a December week and I’m frankly not sure as what may be the underlying reason.

Of course that today’s marketplace has little to do with those days when your grandpappy was calling in trades on a landline back in the 1960s. And given only the past 20 years of history things actually look a bit more bearish even.

This is evidenced by the fact that the Spider stats (which go back to only 1993) show week #50 as the most bearish of the litter. That of course does not mean a red candle is guaranteed but in the context of assessing probabilities ahead of a new week this should be kept in mind before placing any trades.

Finally the histogram which looks pretty normal with slightly positive SKEW (it’s 0.25 on the SPX for this week).

Now for my intrepid subs here are the top and bottom performing stock victims for week #50:

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