As today is the last day of the year 2010, I wanted to run a study on the market using the S&P index over the past 10 years for the last trading day of the year along with the first trading day of the year. Usually, I will give an odds analysis using percentages, but I won’t necessarily go that route for this piece since I am using only a few data points from just the past decade. Below is the filtered data using the S&P futures:
Note: “December Return” is the cash S&P monthly return.
I will focus this analysis on the closing pivots (using the Camarilla method of calculation). Since the end of 1999, on the last trading day of December the S&P future closed below S4 on 5 instances out of 11, making the below S4 close the most frequent occurrence. I am not going to focus as much on odds in this analysis, but given the minimal amount of data points, I will try to view these data results in a broader context. Hence, I have included the December SPX returns as well. The month of December tends to be a strong month. In fact in the month of December the S&P only closed down over 1% once since Dec. 1999. (December 2002 was the outlier, closing down 6% that month.) Today’s trading day is not over, but so far the MTD change for Dec. 2010 is up 6.7%. So in examining the above chart, I will look to the instances when the December return was high. When I look at Dec. 2004, 2003, and 1999 when the December returns were 3.25%, 5.08% and 5.78%, respectively, the futures never closed below S3 (closed twice between S3/R3 and once above R4). So despite the relatively frequent occurrence of below S4 closes on the last day of the year, I feel hesitant to lean on those odds given that in the stronger months, the market closed above S3.
Now shifting the attention to the first day of the year trading, the closing pivots are pretty much split with 4 below S4 closes and 4 above R4 closes (the other 3 times the market closed between S3/R3). Again, I will look at the times when the December returns were strong. So on the first day in January following a strong December month, the market closed below S4 twice and between S3/R3 once. In regards to Monday’s trading, I am leaning towards a pull back below S4. Since the pivots will continue to be tight, I am not expecting a huge down move, just a small pull back.
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