Thursday, September 4, 2008

Good Breadth On Down Days Is No Silver Lining

Haven’t done any mythbusting in quite a while.

Wednesday saw the S&P 500 fall while advancing stocks outnumbered declining stocks. This is the 2nd day in a row this has occurred. Most people will tell you that positive breadth readings on down days suggest bullish implications. I decided to look and see what happened following back to back days of good breadth and lower index prices since 1970.

You could interpret the study as negative. You could interpret the study as a mild underperformance of long-term drift. You could even say it’s basically neutral. Bullish though? I see nothing bullish in the above numbers.

I also looked at performance following single days. It wasn’t much better and still underperformed the long-term drift of the market. Positive breadth on a down day should not be considered a silver lining.

Welcome back Adam and Jamie…


transformation said...

hard to comment, for your quantitative erudition is enormous if not impossible to dispute.

only to say hello. i read ALL your posts, with great delight, and found you from Bill over at VIX and more.

i used to manage 40M over at morgan stanley, etc.

just to let you know, while i do not have an answer and respectfully, again, defer to your excellent quantitative studies am also all to aware of the decline in overall equity markets all while the RUT has not fallen much, as evidenced by lack of deteriorated TRIN or aggegated ARMS, and duly note the lack of negative in New Highs/Lew Lows on the NYSE,

please be so advised i am not a raging bull, having been short more of the last 1.4 years, more often than not, but covered my shorts four times in the last ten days or 13 days, at great leveraged profit, and now am long SLW, having watched USO and SLV for weeks, and the thing that i like is that there is nothing to like!

no sense. we shall see. very tough markets for many, but for me long QID for monetizing declines and long SLW for the very short term bull side has worked out fantastically well--for me.

love your blog. keep up the good work...

if at a glance, you look at my main blog, you will find most of it on chess, but dont let this stop you, as many riches exist there, more than my investment blog, where i truly feel nothing to prove.

warmly, dk

Rob Hanna said...


Good to hear from you. Thanks for the feedback.