The Indicator Has Turned Yellow….

Matt’s Breadth Indicator (as I like to call it) has turned yellow for the first time since I developed it. We have been solidly in ‘red’ territory since May 2015. What does yellow mean? It means maintain the status quo (in this case, stay out of the market). Ten days above the threshold in a row and we move to ‘green’ territory. Stay tuned, fingers crossed…

Read more here.

Momentum and Mean Reversion in Different Time Frames

SPX example

In a recent blog post, I rather glibly stated that the market tends to revert to a mean. A reader called me out about the time frame I was using, which raises a good point. A market can tend toward both mean reversion and momentum over different time frames. Many traders would argue that different markets show different characteristics over specific time frames, and that these characteristics are persistent. Continue reading Momentum and Mean Reversion in Different Time Frames

Yes, Virginia, the Markets are Mean-Reverting

santa virginiaHere’s a stupid system. In fact, I call it the “Stupid 10 Days” system.

You look at the last ten days of trading. If the market at the closing bell is up from the market close of 10 days ago, you buy at the next open. You hold for 10 days, then sell at the next open. A classic momentum play. Wash, rinse, repeat. And remember, you have that uncle who owns a brokerage, so you don’t have to pay commissions. Start with $1000, invest as much as you can each time, and compound that puppy. Here’s what that system would get you with SPY since its inception:

Continue reading Yes, Virginia, the Markets are Mean-Reverting

Sh** Happens (on Tuesday and Thursday Nights)

piles-of-poo

This all started over the weekend, when I started wondering about a trade I had going. The trade hadn’t hit my profit target on Friday and so carried over through the weekend. I started wondering about day-of-week ‘seasonality’ and thought I’d bust out the old charts and see what’s up.

Let’s take a look at SPY from 2000 through the current date. If we buy on a given weekday at the open and sell at the close, what’s the tendency? Is one day of the week better than the others? Here are the averages for each day of the week, open-to-close:

Continue reading Sh** Happens (on Tuesday and Thursday Nights)