Tuesday, December 18, 2007

A Buying/Selling Index, Sentiment, and Other Ideas for Tuesday

* Buying/Selling Index - In my recent post, I mentioned research that treats buying and selling as independent variables. My first stab at this research has been with the NYSE TICK, breaking uptick and downtick readings into separate categories for analysis. By doing this, we find that Monday's action was over one standard deviation below the 30-day median in buying activity and about .8 SD above the median in selling. Compared with the decline in November, the recent drop has been more about weak buying than strong selling, though selling has certainly exceeded buying for the last five trading sessions.

* Blog Traffic Indicator - I wrote earlier about how traffic on this blog has tended to expand during periods of market weakness. August and November were the strongest traffic months of the year, for example, and the days of the market lows were the most trafficked days. Uncertainty seems to lead to a seeking of information across the blogosphere. So I find it interesting that traffic has not expanded over the past five days of weakness. On the contrary, traffic is more similar to the patterns seen at the October and recent December market highs.

* Problems With Self Report - People are not especially good self-observers, which causes problems for surveys. For example, 80-90% of people will rate themselves as "above average" across a whole range of virtues. (Perhaps they are all progeny of Lake Wobegon residents). So it's in that vein that Barry Ritholtz finds that bullish retail survey data have not translated into robust retail activity. What we say and what we do can be quite different.

* Trading More Profitably - Trade Ideas asks for some guidelines from two experienced traders. Turning "best practices" into firm rules that can be made explicit and rehearsed is a valuable meta-strategy for success.

* Current Market Themes - Abnormal Returns finds a number of themes in the market, including the meltdown of quant funds and strong performance of growth stocks; problems with bond insurers and systemic risks; and negative real interest rates.

* Opening Gaps - Trader Mike notes that cash indexes do not accurately reflect opening gaps; a better picture is obtained from futures. This is very relevant to testing out trading systems that might, for example, buy or sell at the market open.

* Best Posts - Charles Kirk has archived his best posts from previous years. Year end is a great time to reflect on personal bests, step back, reassess, set goals, and revitalize for the new year. It's also a great time to view and review fresh ideas. I'll be listing "best of 2007" TraderFeed posts during the last week of the year.

4 comments:

The Financial Philosopher said...

It's interesting, as you stated in your post, that "Uncertainty seems to lead to a seeking of information across the blogosphere."

While I'm not surprised to hear that, I feel compelled to offer one of my favorite pieces of wisdom from Jiddu Krishnamurti: "Freedom from the desire for an answer is essential to the understanding of a problem."

I find it much easier (and rewarding) to "sit still" when uncertainty abounds...

Patience truly is a virtue... and a valuable asset for an investor...

Colin said...

I know its been a crazy time, but I can't believe its been a year already. I'm sure you'd agree, Brett, with that output of yours!

Merry Christmas.

Brett Steenbarger, Ph.D. said...

Hi Financial Philosopher,

Yes, you make an excellent good point. It's one reason really good traders talk about waiting for trades to come to them--

Brett

Brett Steenbarger, Ph.D. said...

Thanks, Colin; it's been a topsy-turvy year, that's for sure!

Brett