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Concerns Over Stock Trading Volume

Trading volume traditionally shrinks over the summer months.  Market participants – whether the retail trader or the hedge fund manager – find more entertaining things to do than sit around fine tuning their positions.  You know, things like going to the beach, going to picnics, going to the zoo, etc.  A lot of ‘going to’ that doesn’t involve sitting in front of a trading screen. 

Now, on top of the normal seasonal dynamic, securities insecurities has a number of traders and investors sitting on their hands, too.  Could be a problem for those of us sitting on any kind of profit resulting from the recent market gains . . .


  • August 16, 2012, 8:19 a.m. ET

Stock Trading-Volume Drop Can’t Be Blamed Only on Summer

 By Sue Chang and Laura Mandaro

Trading in the stock market has slowed to a somnolent pace, even after accounting for all the traders and hedge-fund managers escaping to their vacation homes in the Hamptons.

Get used to it. Volumes could bump along at below-average levels for another three weeks, as investors hang on to recent gains and avoid making big moves before what is seen as the next catalysts–upcoming Federal Reserve and European Central Bank events.

On Wednesday, the volume of shares listed on NYSE Euronext’s (NYX) New York Stock Exchange totaled a paltry 2.64 billion, the fourth straight day with less than 3 billion shares changing hands and roughly 29% below this year’s average volume. The month’s average of 3.3 billion has dropped more than 40% from last August’s daily average.

It is no surprise August volumes look iron-deficient compared to a year ago. In August 2011, investor anxiety about Congress’ bitter fight over raising the debt ceiling and the U.S. losing a triple-A rating led to intense swings on the indexes and a surge in trading volumes.

But even compared to prior Augusts, volume has been slight. NYSE composite volume is on track for its lowest month since December 2007 and its lowest August since 2006, according to the Wall Street Journal’s data group.

For stocks listed on Nasdaq OMX Group’s (NDAQ) Nasdaq Stock Market, 1.52 billion shares traded on Wednesday, which is about 12% lower than the average for this year.

Aside from the usual summer doldrums, a lack of fresh incentives, consolidation in the wake of robust gains over the past couple of months and uncertainties over what, if any, action policy makers in the U.S. and Europe will take to jump-start their economies, are keeping investors mostly in the wings. . . . .   Read rest of article.

Friday, August 17th, 2012 News, Stock Trading, Uncategorized No Comments

Volatility Trading Strategy from Larry Connors

 Larry Connors is the KING of mean reversion trading strategies, and this article reinforces that royal standing.  :)   In a nutshell, volatility – as a phenomenon – can swing higher and lower in the short term, but it strongly gravitates toward its own comfort zone.  That zone, the average (or mean), can move higher or lower over longer periods of time, but in the short to medium term time frame, it is where the volatility will hover.   This trading strategy is a good way of taking advantage of this reality.
 
One note though, and I’m a bit surprised that Mr. Connors didn’t make this explicit: this is a one direction strategy.  In the setup he discusses using RSI(2) over 90 as the trigger, and often an experienced trader will understand that an inverse strategy would work at the other end of the RSI spectrum.  But not in this case.  Primarily, this is because the VXX (the ETF being traded here) is continually falling (check out a year chart to see what I mean), so trying the same thing from the RSI(2) < 10 side of things is NOT indicated. 
 
With that caveat in mind, please read and enjoy!
 


 

A Low Volatility Strategy for Trading High Volatility

By Larry Connors | TradingMarkets.com | July 13, 2012 09:06 AM
 
 

 

We’re going to show you a volatility trading model for VXX which has correctly predicted the price of VXX 97.3% of the time since VXX started trading in 2009. The test results are up through the end of May 2012.Trading volatility, especially VXX, has become a big game among professional traders. You only have to look at the continuously rising average volume in VXX, combined with the many new volatility products that have been coming to the market over the past year, to know that volatility is beginning to join the ranks of other asset groups such as stocks, ETFs, options, forex, and futures.Much has been written about how to trade VXX; unfortunately the majority of the early volatility trading strategies were incorrect. Too many people were comparing VXX to VIX and had considered them the same instrument. They’re not.VIX is an index that settles on a value each day based on the underlying vehicles in the index. VXX is the expected future value of where traders believe volatility will be in the near-term future. One is today’s value (VIX). The other is the marketplaces prediction of where these prices will be in the future (VXX).

There are certain characteristics of volatility which are inherent (and sometimes in conflict with each other). The academic world has shown decades ago that volatility is mean reverting. When volatility gets too far away from its average price over a period of time, it tends to reverse back to its average . . . .  read the remainder of this excellent article here


New trade setup from Boris Schlossberg

Boris is an indefatigable experimenter in the markets. Below is a short video with one of his latest efforts at finding advantages over the markets (and over YOU if you don’t have something like this in your quiver of setup “arrows”)




As always – and especially when trying out a new trade setup – stay timid and size appropriately!

Timorous

Saturday, March 10th, 2012 Uncategorized No Comments

ETF Trading with Larry Connors: The End of Month Short Squeeze Bear Market Rally

For the Larry Connors fans out there, this is some great short-term forward looking advice:


By Larry Connors | TradingMarkets.com | September 27, 2011 08:40 AM
 

No news was good news and the short squeeze bear market rally I discussed Friday and yesterday morning came to fruition on Monday.

The market is now in neutral territory as both our Country Fund ETF Universe and Main ETF Universe have 2-period RSI readings in the 50’s. Any large movement over the next few days will be tied to Europe. Should there not be unexpected news, the rally will continue because it’s the end of the month (and quarter), and the powers that be would much rather see the market down a bit/flat rather than down 7%. They’ll get their way if the news from Europe cooperates.

Should the market rally over the next few days, it will provide some excellent short opportunities heading into Thursday.

The above is from Larry Connors’ Daily Battle Plan.

To learn more about the Daily Battle Plan – including access to Larry’s daily ETF trading signals, click here for more information.

And for more on ETF trading, be sure to visit us here to check out the book that Stocks, Futures and Options (SFO) Magazine called one of the best trading books of 2009: High Probability ETF Trading: 7 Professional Strategies to Improve Your ETF Trading.

Read original article here

Tuesday, September 27th, 2011 Uncategorized No Comments

Riots in U.S. Streets?

This seems a bit capricious of the Mayor, to me, but I suppose the same might have been said about someone predicting this in Europe mere months ago?



Monday, September 19th, 2011 Uncategorized No Comments

Delivering Alpha: China – Bubble or Bonanza?

This “panel” (I put the word in quotes because there are only two panelists) provides some extraordinarily important information about the investability of China.

 

Stock Assault 2.0 - Artificial Intelligence Stock Market Software

Stock Assault 2.0 - Artificial Intelligence Stock Market Software

Thursday, September 15th, 2011 Uncategorized 1 Comment

How To Pick Tops and Bottoms in FX



Monday, September 12th, 2011 Uncategorized No Comments

Quantified Trading Strategies with The Machine: Why a Portfolio of Strategies Beats a Portfolio of Stocks

By Larry Connors | TradingMarkets.com | July 14, 2011 12:19 PM




Did you miss our free online presentation,
 How to Engineer Your Trading Portfolio for Profits?Below is just a part of what Larry had to say about building portfolios of quantified trading strategies compared to the common practice of building portfolios of stocks.To learn more about strategies for building trading portfolios to help you manage and grow your account over time, visit us at the link below.

There are two ways to build a portfolio. The most common way this is done is by building a portfolio of stocks.

If you take a look at the majority of mutual funds out there, this is the way things are done. If you take a look at what they are doing, they are building portfolios of stocks.

It’s commonly done. And it often leads to average returns. You only have to take a look at what the average mutual fund or the average money manager has done over the past decade.

Picking a portfolio of stocks historically leads to average returns.

There’s a better way to build your portfolio. And this is by building a portfolio of strategies. This means taking multiple strategies and then letting those strategies work in different market environments.

This is done by the best people in the business. It is often done by the largest hedge funds. And when you take a look at some of the names who have done this on a quantified basis, you see a James Simons, for example, at Renaissance Technologies, who is a multi-billionaire who has been on the billionaire’s list for a number of years.

You take a look at individuals like David Shaw at D.E. Shaw & Co. Again, they’ve taken a quantified approach and they use multiple strategies, in some cases hundreds or even thousands of strategies. And this approach often leads to superior returns.

So you can go out there and do what is commonly done. You can go out there and pick stocks. That’s what most people do, that’s what most fund managers do.

Or you can go and build a portfolio of strategies, and that’s what’s done by the best and what often leads to superior returns.

By trading a portfolio of diversified strategies you can often lower the volatility of your (trading) account and you can also potentially increase your returns.

Larry Connors is founder and CEO of TradingMarkets and Connors Research

Saturday, September 10th, 2011 Uncategorized No Comments

Party Celebrating Capitalism Has Ended: Fund Manager

Published: Tuesday, 6 Sep 2011 | 7:15 AM ET
By: Patrick Allen
CNBC EMEA Head of News
 

 


America’s strained relationship between democracy and capitalism is at an inflection point that is likely to favor the politicians over the bankers, according to Richard Maraviglia, a hedge fund manager at Carson Capital in London.

Getty Images
 

“The United States could be thought of as a strained marriage of democracy and capitalism,” said Maraviglia in a research note obtained by CNBC.

“The party celebrating capitalism was a great one, but all parties come to an end and so did that one. Whenever one sector of a mixed economy has been ‘in power’ too long, it tends to suffer from hubris,” he said.

Governments in the 1970s acted like the capitalists at the turn of the new millennium. when Wall Street convinced itself that “the more capitalist laissez-fair free-market an economy was, the gentler (non-volatile) a business cycle would be”, according to Maraviglia.

“Capitalism offers the opportunity to get rich, but it also requires the occasional duty of going broke,” he said.

“While socialism offers a relatively calm existence, capitalism presents us with a state of continuous revolution. Creative destruction and capital expenditure booms. Except few were ever allowed to go broke in this cycle. Big government stepped in and took away the business cycle through a series of stimuli or truly unprecedented proportion,” Maraviglia said.

We are now at a point in the battle between democracy and capitalism where the politicians and the business leaders are set for conflict, according to Maraviglia.

“Let’s face it, Washington is a disaster. Political brinkmanship is quite clearly exacerbating what is an already Herculean task. When we look at Merkel, Sarkozy, Obama, and Chavez we see a slow wave of socialism building in the absence of a better solution,” he said.

This had led the likes of Warren Buffett and Howard Schultz, the CEO of Starbucks[SBUX  38.71    0.96  (+2.54%)   ]to call for an end to political donations to Washington until it gets its act together as the market deals with huge uncertainty over the debt[cnbc explains] crisis.

The policy response from the Federal Reserve[cnbc explains] to the current crisis is likely to be operation twist followed by a repeat of QE2, the second round of quantitative easing[cnbc explains] , if we enter a full-on crisis, according to Maraviglia.

“Economies will be cocooned in massive ineffectual, dam-plugging QE,” he said.

“China has engaged in a phenomenal fixed asset investment boom and now it wants to morph its economy into a domestic consumption model. As China daily fixes its yuan higher, it is making millions of Chinese people middle class,” he said.

© 2011 CNBC.com
 
 
 
 
Wednesday, September 7th, 2011 Uncategorized No Comments

Ritholtz: Why Markets and Politics Don’t Mix





Thursday, September 1st, 2011 Uncategorized No Comments