Just What Will The Stock Market Do Tomorrow?

Surprisingly enough, the results for what the stock market will do tomorrow can be predicted with a fairly high probability using some very simple observations. Many studies have examined what is called "Daily Price Persistency". These show that the action of the market today has a definite influence on what the market will do the next day. Here are the probabilities of the movement of tomorrow's market  based on the action of today's market...

If today's market is up...there is a 73% probability of tomorrow's market being up as well, and a 27% probability that tomorrow's market will close down. 

If today's market is down...there is a 62% probability that tomorrow's market will also be down , and only a 38% probability that the market will close higher. 

Historically the market has advanced on 58% of all market days, demonstrating its overall historic upward bias. 

There is one other factor that we can add to the mix that can improve our predictions just a tad bit more. By examining the last 15 minutes of trading action and determining the direction of that last 15 minutes we gain additional insight into tomorrow. If the last 15 minutes of market action are positive and the market overall closes higher, then the odds of tomorrow being an up day improve to 77% compared to the 73% previously stated . Conversely, if the last 15 minutes of the market are negative on an overall down market day , the odds of the market going down tomorrow increase to 73% from the above mentioned 62%. 

These statistics demonstrate that although the markets have a high degree of efficiency, there still is a demonstrable psychological "herd instinct" when it comes to the buying and selling of stocks. These occur in periods as short as one day and for periods lasting several years.  Such inefficiencies make empirical and statistical  timing strategies (such as those used in this report) to  take advantage of such and produce systems that help to both reduce risk and enhance return 



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Important Disclaimer:

The financial markets are risky. Investing is risky. Past performance does not guarantee future performance. This document is prepared solely for informational purposes and is not a solicitation, or an offer to buy or sell any security. Opinions are based on historical research and data believed reliable, but there is no guarantee that future results will be profitable.

The Lussenheide Investment Warrior Report does not advocate trading futures or options. Any mention of commodity futures contracts or options contracts and/or prices in this publication is for illustrative purposes only. This is not an endorsement or recommendation of any commodity futures market nor in margin trading. This is not an endorsement or recommendation of any option market. The risk of loss when trading futures and options is substantial. You can lose more than your original investment.

Any information contained in the Lussenheide Investment Warrior Report and any trading signals from Bill Lussenheide may contain statements that are the opinion of the author. The information and opinions contained in the market letter and signals are believed to be correct, however the information is not warranteed or guaranteed in any way. The subscriber may use the information provided at his or her own risk. No representation is being made that the information will produce trading profits. In no event shall Bill Lussenheide or his family , be held liable for any special, incidental, or consequential damages, whatsoever (including: without limitation, trading losses or any other losses incurred) arising from the use or inability to use the information contained in his  publications, or from delays or failures in the electronic delivery of the publications.