Thursday, October 9, 2008

Extreme Conditions

The market is hitting massive extremes with regards to breadth, price, and volatility. Below is an incomplete list that illustrates just how severe current conditions are:

Take just about any of the conditions above, slice it in half, and under “normal” circumstances it would be extreme enough for a bounce a high percentage of the time.

Note: The top 3 breadth statistics come from Worden Bros. - T2106, T2114, & T2116.


Anonymous said...

Thank you for posting the data. Not being a statistician - I have what is probably a dumb question . I ask you to indulge me. First. I have successfully used Fibonacci for the last 15 years as a trader. It's not working now. The first week of September I bailed out of everything and went 100% cash. My question is - the behavior being observed changes dramatically and the correlation between our traditional or homegrown indicators, etc. to assess that behavior breaks down - is there a name or description for this in statistics? Steve

Marc said...

I believe it's called a stampede...


Where do you think most of the selling is coming from? Hedge funds? 401k withdrawals?

I'm seeing prices on some stocks that even if their earnings take a major hit, they are dirt cheap.


Anonymous said...

Yes, I believe marc word is correct: "stampede". Kind of hard to reason with a big bunch of cows in stampede.
The question is : what (who?) are these cows. I tend to go with the most common guess, forced liquidation by hedge funds, which suddently get visitors from their lending bank, usually a couple of big guys with baseball bats demanding their money back NOW.
As for anonymous and his tribulations with Fibonacci, nothing is working now, no matter how well designed your system is, these are uncharted waters, and statistics probably do not apply.
Opportunities ? Sure.

Anonymous said...

Stampede works.... Talked to a friend at a trading desk and they're saying the Lehman Brothers Credit Default Swaps auction did not go down well today. I think that's the main reason. Steve

Andrew Abraham said...

After the week global banking just went through, no scenario is unthinkable. Banks are in trouble throughout Europe and Iceland's all went broke. Britain is buying shares from its biggest banks for hundreds of billions of dollars, essentially part-nationalizing the sector. And Thursday the American treasury secretary hinted that the U.S. might follow in the U.K.'s footsteps. If banks in the U.S., Britain and Europe are nationalized what does that mean for the layman?

What does it really mean... ???
How does this affect the average American investor. Members of are looking for answers and any and all suggestions. Thanks