Category Archives for "Rotation"
Does the percent of S&P500 stocks trading above their 50 day moving average predict future market returns? Over the last several weeks, I have seen several charts of the percent of S&P500 stocks trading above their 50 (or 200) day moving average overlaid on the S&P500. From these charts, it appears one could build a market timing indicator. The concept really looks like it has promise.
Chart from April to November 2013.
Is it better to buy the worst year-to-date performing stocks or the best year-to-date performing stocks for the month of December? Common wisdom would say stay away from the losers because those are the one that people are selling for tax reasons. Are fund managers buying the winners for window dressing?
In the previous post “Which S&P500 stocks to focus on when the SPX has 5 higher closes,” we discovered which stocks (from the S&P 500) produced the best returns when the market closed higher five consecutive days . The results from that work, as often happens, suggested a deeper look; specifically, can those concepts be applied to S&P 500 stocks without having to wait for specific market conditions (e.g. five up days in the SPX)? If so, maybe this is the start of a viable, standalone trading strategy. As indicated, this post builds on the previous post, so please refer as needed.
Rob Hanna had a good post recently; titled What the String of 5 Higher Closes Under These Circumstances is Suggesting . With mean reversion trading, you are expecting stock prices to snap back towards their mean, like a rubber band stretched too far. But, sometimes, that rubber band can be stretched so far that it breaks (and therefore, won’t snapback). For some time, I have been searching for how to tell when that rubber band is stretched so far that it is broken. Rob’s post had several key concepts that might help us to solve this puzzle and possibly even be the foundation of a stock strategy.