I see that Henry Carstens has added a dashboard to his "Forecasts" page that includes his latest tools derived from his trading systems. One new tool features stocks for pairs trading, where each of the stocks is taken from a high-volume universe. (Above was taken from yesterday's market). Stocks in green have high odds of uptrending; those in red have high odds of downtrending. By buying a green stock and selling a red one (equal dollar amounts for stocks with similar betas, or volatility), a trader reduces the impact of overall market movement and instead trades the relative strength between the two issues.
Alternatively, the green and red stocks could provide screening candidates for long and short trades that fit your own setup criteria. Thus, if you're noticing developing market weakness and see a red stock unable to take out an important price level or fill an opening downside gap, that might be one you would choose to sell.
The tools on the dashboard are updated every five minutes and provide an overview of market, sector, and individual stock strength and directionality. Sweet!
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2 comments:
Brett ~
Thank you for posting the link to Henry Carstens' very interesting pairs trading tracker. It's great validation to see someone else with such obvious smarts thinking about markets the same way one does.
I've built a correlation tracker not entirely dis-similar to Mr Carstens' that filters pairs by time resolution: 200, 100, 50, 20, 10, and 5-day moving averages, and industry sector. It covers the full S&P 500 and a handful of highly liquid ETFs. You've seen a piece of this tool.
For those interested in the building blocks of such a machine: Capital IQ and Mathematica.
The AMEX offers a somewhat primitive but free correlation tracker on their web site. It is a useful starting point for those interested in viewing markets in this way. I view it as a education aide rather than a decision-generator. It can be found at:
http://www.sectorspdr.com/correlation/
You've recently been writing with great insight about emotional impediments we traders sometimes bring to our work. Viewing markets the way Henry Carstens does and I try to do is one antidote for the emotions-based arguments habitual contrarians bring to trading.
I've found it useful to apply my passions to the building of tests and tools rather than fighting the inexorable current generated by millions of anonymous participants ~ most of whose footprints are geometrically larger than mine ~ seeking their own best interest at the expense of mine.
Adam.
Would be interesting to see some stats on performance of this tool - would that be possible?
Kevin
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