Tuesday, March 28, 2006

Trading Update 3/28

First interest rates moved higher on strong economic news, then stocks sold off in response to Fed tightening. The result is that we moved well below the recent multiday range, setting off a short-term downtrend. It was a good example of a dynamic discussed recently, in which moves in the stocks are most likely to trend when we see significant movements in energy, interest rates, and or currencies. New 20 and 65 day lows expanded to 618 and 234; Supply exceed Demand by 101 to 48. As long as we continue to make day over day lows and expand new lows and Supply, selling bounces below the day's average price is the operative mode.

3 comments:

John Wheatcroft said...

I followed my instincts on this one and yesterday afternoon at 3:50 I loaded up on a bunch of longs that I sold off into the rebound this morning. The reason why I did that was the "sell-off" looked "stupid" for want of a better word. Most of it was done in the first 20 minutes and then it started to rebound. There wasn't even that much volume associated with the drop. It just looked to me like hedge funds grabbing some easy shorts and that it would be followed by covering today. Overnight of course the futures were up as was FTSE.

Money for nothing thanks to Ben and the boys.

Brett Steenbarger, Ph.D. said...

Hi,

Very testable idea: Buy late selloffs and sell at or near the next day's open. It's modestly profitable as an overall strategy...

Brett

John Wheatcroft said...

Whoa - First - not every sell-off - as I noted that one looked "stupid." Second - my picks were carefully analyzed and selected to not be crazy today.

For anyone else who might read this - don't try this approach unless you test a lot first. It only looks like easy money.