Probability Trader

All Ordinaries Index - 6 consecutive Up days in conjunction with a 250-day closing high. Bullish or Bearish? The All Ordinaries Index has closed in positive territory for 6 consecutive trading sessions gaining a little over 3%. After such upward persistence it is very hard to resist the temptation of fading this recent winning streak & strength. However, the historic record suggests that this type of market momentum usually goes a little further than most market participants would believe. Since 1990, the All Ordinaries Index has produced 6 consecutive up days closing at a 250 day high (approximately 1 year high) on 21 independent (non-overlapping) occasions. Counter intuitively, following such upside persistence, the All Ordinaries Index was higher 20 days later on 19 from 21 occasions, delivering an average gain of 2.17% (max = 6.23%, min = -2.02%).


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Probability Trader

The conditional return of 2.17% versus the unconditional return (random) of 0.45% is statistically significant at well north of the conventional 1 in 20 level (t-Test: Two-Sample Assuming Unequal Variances). In terms of financial market time series analysis the statistical significance of this study is high.

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Andrew McCauley

The return of 2.17% for the 20-day forward interval is over 4 times that of the average 20-day return for the All Ordinaries Index from 1990 to 2013 of 0.45%. Also, your conditional win rate of 90% is significantly higher than that of any random 20-day interval of 59%.

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