Monday, July 13, 2015

Tracking an Oversold Market and More Fuel to Start the Market Week

*  Above we can see that we're coming off an unusually oversold level on the composite indicator that I've created from two technical measures.  What we're looking at is a ten-day moving average of daily buy signals versus sell signals for every NYSE stock for two indicators:  Bollinger Bands and Parabolic SAR.  (Raw data from the excellent Stock Charts site).  Going back to June, 2014, when I began collecting these data, if we divide the signals into quartiles, we find that the strongest composite indicator readings have led to a next 10-day return of +.32%.  The weakest composite indicator readings have led to a next 10-day return of +.42%.  All other readings have averaged a next 10-day return of only +.08%.  In other words, most of the recent price action is attributable to short-term momentum and mean reversion.  There has not been much of an edge trading middle-level market strength.

*  The key to making the most from setbacks and failures in your trading.

*  Taking a fresh and skeptical look at bonds and more good reading for the market week from Abnormal Returns.

*  The How of Trading takes a look at the importance of trade planning.

*  Perspectives on Greece and other timely topics from The Reformed Broker.

*  Why keeping a journal is a great psychological tool.

Excellent perspective from Barry Ritholtz:  We've had large intra-year corrections on average, but the great majority of the last 35 years have finished with positive performance in stocks.

Have a great start to the trading week!