Friday, May 25, 2007

Musings for a Friday

* When downside momentum is strong - My Demand/Supply Index hit a lopsided extreme on Thursday, with Demand at 23 and Supply at 210. As noted in my recent post, that means that we have about 9 times as many stocks that closed with significant downside momentum as ended with significant upside momentum. Going back to 2005 (N = 582 trading days), we've only had 7 occasions in which Supply has exceeded 200. The S&P 500 Index (SPY) was lower three days after this extreme on six of those seven occasions, with an average loss of -.57%. In other words, very strong downside momentum tends to persist in the short run before reversing. On average, it's when we see price lows on improving momentum that we look for bullish reversals.

* Excellent update on links - Trader Mike does an excellent job of updating his site with practically relevant links for traders. There are some particularly good posts in his recent updates, including thoughts re: Web 2.0 and China bubbles. And if you're looking to get a jump on long weekend reading, check out Abnormal Returns' links--particularly the interesting post on an indicator off the beaten path.

* Wickedly funny post - CXO Advisory lists the top ten guru excuses for getting the market wrong. Check out their analysis of guru calls on the market.

* Spotlight on China - Ticker Sense does a fine job tracing the "A" and "B" shares in Shanghai vs. the Yuan.

* The Personal Bankruptcy Storm - Mish has provided a detailed and eye-opening analysis; great work.