Assessing Market Action With Indicators And History
Wednesday, July 22, 2009
Lagging Banks Potentially Bearish
Despite the rise in the S&P 500 on Tuesday the banks (BKX) fell over 3%. Historically when the banks have fallen sharply while the S&P has risen, it has often been followed by weakness in the S&P. Below is a study that exemplifies this.
(click table to enlarge)
Both the low winning percentages and the fact that losers were larger than winners suggest a downside edge over the next 1-5 days.
3 comments:
Daniel
said...
A study like this is especially useful when taken in context. The Banks are of great importance always, as are the Semiconductors, as sensitive sectors which often lead broader indexes.
However there is a prevailing fundamental wisdom, which I believe is true: ..That since the banking and housing industries got us INTO this mess of an economy, no true and lasting economic recovery will take place without strong participation and even leadership from these very sectors, and no market blowout move will occur without the share-price appreciation of their key companies.
So while I always pay attention to Rob’s studies on the SOX, the broker-dealers, key Internet leaders, etc., as potential lead-indicators giving advance warning, in THIS fundamental environment unusual strength or weakness in the BKX or other banking indices is of double interest.
In this blog I will be examining market action and quantifying my findings. Using sentiment, breadth, price and volume indicators - both standard and customized - I will try and uncover short-term edges which could be taken advantage of by market participants. I will frequently add opinion to these studies and may sometimes post opinions without quantifiable research behind them.
All content on this site is provided for informational purposes only. It is NOT a recommendation or advice to buy or sell any securities. I may hold positions for myself or clients in the securities or industries mentioned here. There is a very high degree of risk involved in trading securities. Your use of any information on this site is entirely at your own risk.
I have traded professionally since 2001. From January 2003 through February 2007 my bi-weekly column "Rob Hanna's Putting It All Together" appeared on TradingMarkets.com. I have been conducting quantitative research and designing trading systems - mostly focused on short-term edges since 2004.
3 comments:
A study like this is especially useful when taken in context. The Banks are of great importance always, as are the Semiconductors, as sensitive sectors which often lead broader indexes.
However there is a prevailing fundamental wisdom, which I believe is true: ..That since the banking and housing industries got us INTO this mess of an economy, no true and lasting economic recovery will take place without strong participation and even leadership from these very sectors, and no market blowout move will occur without the share-price appreciation of their key companies.
So while I always pay attention to Rob’s studies on the SOX, the broker-dealers, key Internet leaders, etc., as potential lead-indicators giving advance warning, in THIS fundamental environment unusual strength or weakness in the BKX or other banking indices is of double interest.
Daniel
Daniel,
So does your thesis hold true for the last bear market, or others? If I remember correctlyo gold miners, not tech, was the leadership in 03.
thanks,
The Other Daniel
Response to O.Daniel:
It is not so much a thesis as an observation. On several recent swing moves the BKX moved noticeably in that direction first, providing lead time.
What is most ailing is often most closely watched, it kind of makes sense.
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