Monday, April 28, 2008

Musings for a Monday

* Lack of Follow Through - A number of traders have mentioned to me how difficult they've found the trading over the last several months. It's almost as if each day has its own theme and pattern, with little follow through from one day to the next. I took a look at the daily money flow figures for the 80 S&P stocks across the eight sectors, as posted earlier today. Just looking at the data since the beginning of November (N = 120 trading days), it turns out that when money flows have been positive on the day, the next day in SPY has averaged a loss of -.42% (12 up, 22 down). When money flows have been especially negative on the day, the next day in SPY has averaged a gain of .34% (16 up, 13 down). Moderately negative money flows on the day have led to very flat performance. When we get solid buying in stocks, it's tended to not follow through, but when we've had strong selling among stocks, it too has tended to reverse. Not an easy market for short-term trend followers.

* Advance-Decline Perspectives - The excellent chart above from Decision Point shows the advance-decline line specific to common stocks only within the NYSE universe. This is a great representation of the strength and weakness within the broad market. Note that the AD line has gone nowhere of late, even as price has ground higher. This fits with the observations from the recent indicator review, which noted diminished participation during recent market strength. I find Decision Point's coverage of indexes and sectors quite helpful, with indicators not found elsewhere.

* Worth Reading - The Kirk Report links many interesting themes, including solar stocks that look good; quite a list of trading tips; and a useful ETF performance tracker. Also check out the links from Abnormal Returns, including an interesting study that shows how past positive experience (reinforcement) affects future investment decisions.

* Web 3.0? - Fascinating article on how information from blogs and other sources is being aggregated in real time to create a new kind of news.