Friday, May 01, 2015

A Friday Potpourri of Trading and Market Views

*  On Thursday across the NYSE universe, we saw quite a few more stocks close below their lower Bollinger Bands than above their upper bands.  As you can see from the chart above, important intermediate-term lows have occurred in market cycles when we've seen a plethora of stocks trading below their lower bands.  I went back to the start of my data set (May, 2014; raw data from Stock Charts) and looked at all occasions in which we registered more than 200 stocks below their lower bands versus above their upper bands, where this was the first occasion in at least two weeks.  Interestingly, three days later, SPY was up twice and down five times for an average loss of -.54%.  Too small a sample to hang one's hat on, but the point is that markets can display short-term momentum to the downside as well as upside when there is a strong breadth move.

*  We often hear that your trading style should fit your personality, but what is your trading style and what aspects of personality are important to performance?  Too often traders lose money because they drift from one trading style to another, not mastering any and not truly leveraging their strengths.  I can think of few more important topics in trading psychology.

Banks are not providing the liquidity they once did.  This can lead to mini flash crash situations and is very relevant for risk management.

*  Two valuable professional activities are networking and not working.  Networking exposes us to new ways of thinking and new ideas; as James Clear suggests, not working allows us to renew and rejuvenate, so that we can generate our own fresh perspectives.  I'll be announcing a NYC networking event for active traders shortly.

Further Reading:  Pure Price Momentum