Monday, April 13, 2015

Opening the Week With New Ideas

*  Here are three charts that I use to track demand and supply in the broad stock market.  I decompose the time series for the NYSE TICK (number of stocks upticking vs. downticking at each moment of the trading day) into a measure of Buying Pressure (top chart; a measure of upticks); Selling Pressure (middle chart; a measure of downticks); and Balance (bottom chart; the daily net of upticks vs. downticks).  In recent sessions, we've seen relatively restrained buying interest and also relatively restrained selling.  This is typical of low volume, low volatility markets.  On a net basis, we've generally seen more buying than selling pressure and stocks have drifted toward their highs over this period.  This is as much due to a relative absence of sellers as the positive presence of buyers.  Institutional players--those that drive volume as buyers or sellers of baskets of stocks--have been quiet of late, creating few surges of either buying or selling activity.

*  When academic reviewers took a look at the profitability of traders, they were shocked by how poor the results looked.  Here's my psychological look at what separates the winners from the losers.

*  More evidence that active fund managers as a group fail to outperform their benchmark indexes.  In fact, managers in every category fail to outperform.  You would think that half would outperform by sheer chance.  As the article emphasizes, however, the odds of such across-the-board underperformance occurring by chance are ridiculously small.  It's not that managers lack a positive edge.  They actually seem to have a significantly negative one.

*  It's very difficult to not find good posts on the Quantocracy site.   

*  It's also very difficult to not find something good in the weekly top clicks at Abnormal Returns, including an unusually good study of moving average rules--what works and doesn't work.

The $STUDY stream from Stock Twits invariably contains some gems.

*  Here are some coming resources from Adam Grimes, including a primer on how to study markets with quant tools.

 *  Great post from SMB on what golf teaches us about trading.

Have a great start to the week!