Thursday, July 19, 2007

The Personality of the Stock Market...and Much More

* The Personality of the Market - One of the great challenges of a short-term trader is identifying whether a trading day is likely to be rangebound or trending. As noted in my Twitter comments, I started entertaining the idea of a rangebound market today by mid-morning. Some of the telltale clues: reduced volume compared with recent norms; drying up of volume as we approach range extremes; choppy trade with frequent reversals of market moves--a sign that locals are dominating trade; and the absence of trending moves in markets that often drive stocks (bonds, currencies). It's much easier to frame intraday trading ideas if you can figure out the character of the trading day.

* Great Trading Resource - Michael Covel has assembled a large group of articles, including ones on money management, dealing with uncertainty, and an interesting view on the frequency vs. magnitude of being correct. Excellent site.

* Fascinating stats on the S&P 500 Index - The IndexArb site displays an updated list of the market capitalizations of all stocks in the S&P 500 Index. The top 50 stocks in the index account for nearly 50% of the entire capitalization. The bottom 50 stocks account for only 1.2% of the index's value. The site also updates the weighting of the stocks within the S&P 500 Index. The top 20 stocks comprise 30% of the index weighting. The bottom 100 stocks account for only about 3% of the weighting. Tech is well-represented: Microsoft, Cisco, IBM, Intel, Hewlett Packard, Google, and Apple are among the top 21 most weighted stocks.

* Great Call on Tech - The DK Report nailed this one; hats off. See also his post highlighting the recent surge in NASDAQ new lows. Here's more perspective on NASDAQ lows from Trader's Narrative.

* Secret to Investing Success? - Excellent post from CXO Advisory showing how low volatility of returns is a major ingredient in market outperformance among hedge funds. That is definitely true in my own trading.

* Reflections on Remorse - Dr. Bruce Hong examines how remorse affects traders. See also his insightful post on how to put cognitive dissonance to work in trading.

* Alexa for Firefox - Thanks to Trader Mike for the heads up on the new Alexa toolbar for the Firefox browser.

* Tracking the Market Down Under - Davin's Trading Report follows the SPI futures and looks for moves at particular times of day. Interesting approach.

* Shipping Gone Wild - Excellent post from The Kirk Report on the performance of the shipping sector and why it's showing up so frequently in his Screen Machine output.

* Yield Perspectives - More good links from Abnormal Returns illustrate the dimensions of the mortgage mess and how investors are fleeing to safe bonds, reducing treasury yields.

* Dollars Unloved - The Big Picture offers a sneak peak at weekend links, including a post on the unloading of dollars by Russia. See also Trader's Narrative long-term picture of the dollar and Tom Lydon's post for Seeking Alpha re: ETFs for trading the weak dollar.

2 comments:

F. said...

Dr. Brett,

If you have time, I would certainly appreciate a moneyflow analysis of CYH.

Thanks.

Brett Steenbarger, Ph.D. said...

Hi F,

If you send me an email with the request, I'll send you the raw data as an Excel attachment. Thanks--

Brett