Welcome to a new feature of both the monthly report and of MRCI's Web site, http://www.mrci.com.
We have introduced you to the ScenarioSM decision-logic
technology with our specific case studies on each month's "Futures Highlight".
Though each case is studied in depth, it is limited to a single contract. The ScenarioSM
Monthly Summary presents the results of performing individual case studies across the spectrum
of markets and selecting those whose subsequent market behavior has been historically reliable. (Note: the
ScenarioSM Monthly Summary is filtered to those markets which have had an 84% or higher historical follow through.)
Underlying Concept
The thrust of the research is to give traders a longer-term perspective on markets, to help them
see the "forest for the trees," if you will. Distilled to its essence, the technology
searches for markets that have exhibited a reliable tendency to follow through after a higher/lower
monthly close for a given month.
What do we mean by follow through? If the market's monthly close is higher than the previous
month, subsequent market action within the next two months should exceed at least the high of
the month with the higher close. Thus, beginning on the first of each month traders have a
minimum objective, often a substantial distance from the month-end close, on which history
suggests they can have a high degree of confidence the market will meet, at least before a major
reversal in trend. Further, by normalizing those previous occurrences on which the study is
based, an average objective, usually an even more substantial distance from the month-end close,
can be projected.
Examples
Absent a more complete explanation, let the two examples below suggest how someone could read
the summary table on the following page - and the possible conclusions that could reasonably be
drawn. As always, this is not to predict but to let the statistics speak for themselves.
Examples from the ScenarioSM Monthly |
Historical Data |
Scenario Data |
Mkt |
Cond |
Month |
Prev Close |
Month High |
Month Low |
Month Close |
Pct Range |
Total Years |
Cond Years |
Action Years |
Pct |
Scenario Objective |
Average Objective |
#DJ |
Higher |
Feb |
6813.00 |
7074.00 |
6710.00 |
6878.00 |
46% |
45 |
25 |
24 |
96% |
7074.00 |
7480.83 |
#DJ - Dow Jones Industrial Index
The Dow Industrials (Mkt) ended higher (Cond)
for February (Month). Compared to January's 6813 (Prev
Close), the market ended February at 6878 (Month Close),
that being 46% (Pct Range) of the range from 6710 (Month
Low) to 7074 (Month High).
Comparing January/February closes for each of the last 45 years (Total Years
studied), Scenario found the DJI had closed higher in February than January in 25 (Cond
Years) of those years. Of those 25, the DJI subsequently exceeded February's
high within the next two months in 24 years (Action Years), or 96% (
Pct) of the time.
Therefore, the historical odds are high for the DJI to exceed 7074 (Scenario
Objective) by no later than the end of April. If it does so, Scenario would
further project a potential move toward 7480.83 (the Average Objective,
derived by normalizing subsequent market action in those 24 previous years). (Note: Historical
studies suggest that the extreme price is often reached approximately 5 weeks into the Scenario
period.)
SPM7 |
Higher |
Feb |
794.90 |
827.80 |
778.00 |
797.90 |
40% |
14 |
11 |
9 |
82% |
827.80 |
866.74 |
SPM - June S&P 500
The June S&P (Mkt) ended higher (Cond) for
February (Month). Compared to January's 794.90 (Prev
Close), the market ended February at 797.90 (Month Close),
that being 40% (Pct Range) of the range from 778.00 (Month
Low) to 827.80 (Month High).
Comparing January/February closes for each of the last 14 years (Total Years
studied), Scenario found that the June S&P had closed higher in February than January in 11 (
Cond Years) of those years. Of those 11, the contract subsequently exceeded
February's high within the next two month's in 9 years(Action Years),
82% (Pct) of the time.
Therefore, historical odds are high for the June S&P to exceed 827.80 (Scenario
Objective) by no later than the end of April. If it does so, Scenario would
further project a potential move toward 866.74 (the Average Objective,
derived by normalizing subsequent market action in those previous 9 years).
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