Tuesday, April 14, 2009

Is Buying Drying Up...Again?

In the past I’ve discussed how extremely low SPY volume is often a bearish indication. Below is an updated version of a study I posted nearly a year ago on 4/22/08.

While the edge here is not the strongest in terms of % or magnitude it has been consistent over time. Below is an equity graph of the 5-day exit that was highlighted in yellow above.


Jeff said...

Rob, what is your feeling on using the volume reports for the SPX vs. the SPY?


Toptick said...

This is consistent with the fact that the major index ETFs are shorting/hedging vehicles for lots of traders. Volume on these is a sentiment indicator (low volume = low pessimism), and spikes in SPY/$SPX volume coincide with market stress.

Rob Hanna said...

Either one can help to provide an edge. I look at both. It's not a case where you need to choose one way to look at it and only use that.

Good comment.

Douglas said...

toptick - like the comment. Have you any other interesting / unusual sentiment indicators othe than the obvious ones like VIX, VXO CPC etc.

everyone - I think we are at a major top. Run for your lives!

Anonymous said...


an excellent study, but the respective results would show a (partly very) different picture (and significantly more indicative) if you'd additionally differentiate between those occurrences on a rising 10-day SMA (SPY) and those on a declining 10-day SMA (today's 10-day SMA of SPY > Yesterday's 10-day SMA of SPY).

Since, 05/03/1993, those occurrences on a rising 10-day SMA show an at least comparable, but over the course of 10 days on 8 days (!) a slightly better than random (means at-any-time) profit factor, and from day 6 onward a significantly better than random profit factor.

Those occurrences on a falling 10-day SMA show a disastrous profit factor over the course of ALL 10 days, regularly between 0.10 and 0.40 (which leads -if the results concerning rising and falling 10-day SMAs are averaged- to a slightly negative bias).

So 'on average' this survey would indicate a limited upside potential over the course of the next couple of sessions, but with respect to the fact that we currently experience a rising SPY 10-day SMA, chances are at least random (if not better) for a higher SPY over the next couple of sessions.

The dominating factor is the rising or falling SPY 10-day Simple Moving Average (SMA).

Best regards

alysomji said...

Excellent point, Frank.

Rob, I hope you will take this into account in future posts (i.e. slope of 10-day SMA of SPY).

Both of you guys are awesome.