Monday, March 30, 2015

Promising Ideas to Start the Trading Week

*  I've found it helpful to track the correlations among the various sectors of the SPX by using creating an overall correlation index from the sector ETFs.  What you typically find is that, as cycles top out, there is divergence among the sectors.  That shows up as a drop in correlation.  Conversely, at market lows, there tends to be a risk-off washout across sectors.  That results in a rise in correlation.  I went back to the start of 2014 and divided the sector correlation data into quartiles.  When correlation was in its highest quartile, the next 10 days in SPY averaged a gain of +1.87%.  All other occasions averaged a loss of -.01%.  In other words, periods of elevation in correlation have accounted for all of the market's gains over that time.  We're not in that highest quartile at present.

*  The techniques I'm currently working on for improving concentration, mood, and performance are ones that involve a major shift in states of consciousness.  When we are in radically different states, we can access new information (intuition) and fresh energy.  We can also break old, undesirable patterns of thought and behavior.  This post outlines the essence of the approach.

*   A great and simple crowdsourcing strategy for finding good ideas is simply to track the top clicks on the Abnormal Returns site each week.  I inevitably find something of value, such as the very interesting post on why pursuing yield might not be the wisest investment strategy.

*  Here's a great post on a great site:  combining value and momentum strategies, from Alpha Architect.

*  Thanks to a savvy manager for pointing out this very promising line of research from an excellent site:  what it means when returns on stocks and bonds are positively correlated, from MKTSTK.

Have a great start to the week!