The Curious Incident of The Dog in The Night-Time

The Sunday theory of a fast down move this week has evolved a bit, but the expectation remains.  There was a curious event Wednesday on the NASDAQ which feeds into my bearish conviction.  When I say curious,  it means I have logged years of data and tested theories using the information.  For example, I label every day type more-or-less along the rules set forth by Dalton in Mind Over Markets.  These are the day types, listed from highest-to-lowest directional conviction:

1. trend
2. double distribution trend
3. neutral extreme
4. normal variation
5. normal
6. neutral

Then I test for statistically relevant events.  A high probability statistic is the edge I need to enter a trade.  There is an edge based off a trend day.  Tuesday was a trend day.  The edge is that over 70% of the time we exceed the high or low mark of the trend by at least one tick during the following session during regular trading hours.  The statistic is symmetrical, meaning it works both for trend day up and down.

We love symmetrical statistical advantages.  They are a beautiful feature of the universe.  Wednesday defied the statistic.  We did not exceed Tuesday’s high by a tick during Wednesday trade.  And when we do not conform to a statistic, it reminds me of an old Sherlock Holmes story called Silver Blaze.  The fact that buyers could not conform to a high-probability statistic is a clue that sellers are still actively engaging the market.

Unless something major changes overnight, the Bunker Buster bearish-to-bullish trading bias remains.

Trade accordingly.