June 30:  The Dow lost 1%, Nasdaq .6%.  Separation between groups was a measly 1.7%.

Only a handful of groups showed gains.  Even then, the gains weren't especially significant in the sense that the market was focusing on particular groups.  Stocks that are not strongly linked to other stocks (a low "corr" value) led our list...up .2%.  Non-volatiles fared well, despite the losses in the Dow.

As with those groups that gained, nothing particularly significant manifested on the negative side of our tables.  Volatiles, yesterday's winners, and recent winners in general were weak.

It's interesting to note that no industry groups at all appeared in our tables today.

The above trends are negative for the next session.

June 29:  The Dow lost .3%, Nasdaq .1%.  Separation between groups was 2%.

Stocks trading well below their 20 day averages led the way today, gaining 1.4%.  Recent losers were strong as well.  Those with nice gains in this time slot last year fared nicely as well.  No industries were featured on the winning side of our tables.

On the losing side, nothing of great significance manifested.  Stocks with big gains last Friday lost .5%.  Large caps were weak, as might be surmised by the losses in the Dow.  Healthcare stocks underperformed.

The above trends are positive for the next session.

June 28:  The Dow gained 1.1%, Nasdaq 1.2%.  Separation between groups was a hefty 3.9%.

Last Thursday's losers led the way, gaining 3.8%...interesting, as Thursday's session itself was rather unfocused, with no particular groups standing out in terms of gains or losses.  Volatile stocks, cheap stocks, and those that gained nicely this time last year all gained above 2%.  No industry groups appeared on the positive side of our tables.

Oils were weak, gaining a mere .2%.  Non-volatiles, REIT's, last Thursday's big gainers, and large caps in general were weak.

The above trends are positive for tomorrow's session.

June 27:  The Dow lost .1%, Nasdaq .4%.  Separation between groups was 2.7%.

Oils led the way today, up .8%.  Small caps were strong.  Insurance stocks gained nicely.  Stocks with low p/e ratios fared well.

On the losing side, we find semiconductors...down 1.9%.  Volatile stocks and yearlong losers (heavily represented by semiconductors) were weak.

The above trends are negative for the next session.

June 24:  The Dow lost 1.2%, Nasdaq .8%.  Separation between groups was 3.1%.

Stocks with negative cash/share positions led the way today (+1.1%)...an odd result, but quite significant in a statistical sense.  Stocks with low insider holdings, poor performances over the last 3 years, and low short positions were strong.  Biotechs were the only industry that performed well enough to make it into the winning side of our tables.

It's interesting to see the degree to which fundamentals indicators dominated our tables today.

On the negative side, semiconductors lost as much as 1.9%.  Cheap stocks, yearlong losers, retails, and Tuesday's winners underperformed the average stock.

The above trends are negative for Monday's session.

June 23:  The Dow lost 1.6%, while Nasdaq lost 1%.  The losses were supposedly instigated by the fact that oil breached the "psychologically important" $60/barrel level, if only for a short time.  Maybe it's true, maybe it's not.  Separation between groups was 2.2%...one would expect a greater figure on a day where the indices lost like this, but the truth is no clear-cut trends came into focus today.

We didn't identify any groups that actually made money today.  Oils resisted losses...down .3%.  Nevertheless, we figure a 19% chance that this result was a "fluke" (i.e. summing randomly-chosen stock gains and losses over the entire market will produce a better result fairly frequently).  Utilities and REIT's held up well.  Tuesday's big losers were strong.  Non-volatiles in general and dividend payers were safe positions today.

Losers were led by metals and mining...down 2.5%.  Normally, of course, oils and metals are positively linked in terms of trading behavior, so this behavior should be watched.  Losers of every variety...1 day to 3 months to 1 year...were hurt today.  Small caps were weak, despite what the Dow/Nasdaq difference would have you believe.

The above trends are negative for the next session.  One should bear in mind that Friday sessions are the most likely to reverse recent trends, however.

June 22:  The Dow lost .1%, while Nasdaq was flat.  Separation between groups was 1.6%...the smallest figure we've seen for quite a while.

No trends of great significance manifested on either side of our tables today.  Staying with yesterday's winners resulted in gains around .8%.  Small caps outperformed.  Stocks that have been historically weak in this time slot tended to gain.

On the losing side, volatile stocks underperformed.  Stocks that lost in this time slot last year continued to do so today.  3 month losers were weak.

The above trends offer little in the way of prediction aids...the general weakness in volatile stocks must be taken as a bearish sign.

June 21:  The Dow lost .1%, Nasdaq gained 1%.  Separation between groups was 2.4%.

Despite the slightly negative tone of the market, risky or volatile stocks led the way...those with negative earnings per share figures gained .9%, while stocks with high recent volatility weren't far behind.  Recent losers and small cap stocks in general were strong.

Oils led losers...down 1.4%, far outpacing any other group.  Dividend-payers in general were weak.

The above trends are positive for the next session.

***********

I recall an article several months ago wherein the author scoured through data to find the best predictors of voting preference in the last presidential election.  When all was said and done, a vote for George Bush was strongly predicted by counting the number of children you have.  This predictor beat out other "commonsense" predictors...religious affiliation, income bracket, location, etc...by a good margin.

The summer is well known as the weakest investment period in the U.S. market.  Not only is it weak, but the best strategies for winning in the market involve relatively conservative strategies...going with low-risk stocks, and avoiding volatile positions.  Unlike most of the rest of the year, bottom-fishing is not advised...yearlong winners tend to prosper.

To speculate a tad:  is it possible that the presence of children spurs on some sort of primal, protective, conservative instinct that leaves a mark on both politics and the movement of the stock market?

June 20:  Both the Dow and Nasdaq lost .1%.  Separation between groups was a relatively low 1.9%.

Our leading group today was biotechs, continuing to rebound from a poor performance in the first half of the month...up .8% for the day.  Friday's gainers were strong.

On the losing side were more industries:  metals and mining lost as much as 1.1%.  Semiconductors were weak as well.  3 month losers fared poorly.

The above trends are slightly negative for the next session (we'd like to see gains in volatile semiconductors).

June 18 (Sat):  We've been conducting a test of afterhours price changes as predictors of gains and losses in the next regular (open to close) session.  In the early stages the test looks promising, but we've noted some odd behaviors that could throw a monkey wrench into the strategy.

Yesterday's activity was particularly odd.  It appears that an excess of opening values were unrealistically low on this day...most of the stocks with large afterhours losses rebounded very quickly, if not spontaneously, on the open.  There were 13 stocks that opened precisely 15% (give or take .04%) below the previous day's close (wdfc, slgn, wstc, ptsi, natr, thor, mrln, saft, vitl, surw, supx, shoo, ntrt)...very strange.

We actually examined the daylong charts of the 50 stocks with the greatest afterhours losses.  Question is:  of the stocks that could easily have been bought near their opening prices, would a profit have been realized by buying at the open and selling at the close?  The answer, at least for yesterday's session, still seems to be "yes".

Of course, yesterday was options expiration day.  Interesting.

In the sense that it would have been impossible to actually purchase many of these stocks near their opening value, these opening values cannot be considered legitimate.  Yet these values will indeed be recorded as the correct values for posterity.

June 17:  The Dow gained .4%, Nasdaq .1%.  Separation between groups was 2.2%.

Biotechs led the way today (+1.5%), continuing yesterday's strength.  Monthlong losers were strong.  Dividend payers outperformed.

On the losing side, monthlong gainers (-.7%) were hurt, followed by semiconductors and software stocks.  Stocks with high insider ownership were weak. 

The above trends are a tad contradictory in terms of predicting Monday's action...we'll refrain from a prediction.

**************

We've got our data for the first half of June (ending on Tuesday's close).  We have the market up about 2.5% over the period.

Oils were our strongest stocks (again) for the period...up about 6%.  Stocks with a history of weakness over the period (largely oils) were up nicely.  Entertainment-related stocks fared well.  Stocks that finished May in strong fashion continued to gain.

Biotechs were our only group that actually lost (note, however, yesterday's big gains in the group)...down a tad under 1%.  Stocks with any variety of losses...recent to yearlong...underperformed.  Banks and software stocks underperformed.

In terms of resemblances to historical periods, June h1 2004 and 1999 fit well.  Unfortunately, the performances of June h2 2004 and 1999 are somewhat contrary in terms of the groups that prospered (3 month losers were quite strong last year, while 3 month winners were strong in 1999).  Both periods, however, were quite positive for the general market.

June 16:  The Dow gained .1%, Nasdaq .7%.  Our own take on the market had it up 1%.  Separation between groups was 3.2%.

Several groups gained better than 3%.  Leading the way were stocks trading well below their second most prominent resistance levels...up 3.4%.  Stocks with large yearlong or 3 month losses were strong.  Stocks with weak profit margins gained nicely.  Biotechs were up 3.2%, fueled by Pfizer's $1.8 billion takeover of a fairly obscure company, Vicuron.

On the weak side, non-volatiles led the way, with gains as small as .2%.  REIT's and retails were weak.

The above trends are bullish for the next session.

June 15:  The Dow gained .2%, Nasdaq .3%.  Separation between groups was 2%.

Metals and mining was our strongest group today...up 1.5%.  Naturally, oils weren't far behind.  Stocks with nice recent gains fared well.  With oils doing well, it's no surprise that yearlong gainers were also strong.

Losing groups were led by biotech...down .5%.  Monday's losers, and recent losers in general, were weak.  Non-volatiles underperformed.

The above trends don't point strongly in either direction for tomorrow's market.  The weakness in non-volatiles can be seen as a bullish sign.

June 14:  The Dow was up .2%, while Nasdaq was flat.  Our own take on the market had it up .8%...small caps were strong, despite Nasdaq's weakness.  Separation between groups was 2.1%.

Stocks with strong recent volatility topped our list of gainers today...up 2.2%.  Yesterday's losers and Friday's losers were strong, as well as 3 month losers. 

No groups actually lost money today.  Nothing particularly significant emerged on the weak side of our tables...large cap stocks were weak, along with non-volatiles in general.  Software stocks underperformed.

The above trends are positive for the next session.

June 13:  The Dow gained .1%, Nasdaq .3%.  Separation between groups was 2.1%.

Our best performing stocks were those with high PE ratios (up 1.5%).  Friday's losers were up as well.  Yearlong gainers (largely oils) were up nicely.  Heavily shorted stocks gained.

On the losing side, the riskiest of stocks were weak...down .7%.  The smallest of small caps underperformed.  Stocks with a low "corr" value lost.

The above trends are a bit contradictory, so we won't offer a guess on tomorrow's session.

******************

As promised, we've reworked some of our tables that focus on the short-term trading patterns of stocks, breaking the market down into the after hours, the regular hours, and the sum of the two.  Even if you're not a daytrader, there's probably some insight waiting to be gleaned.  Take a look.

June 12 (Sun):  We looked for the best predictors of next day market performance over the last year, as opposed to longer time frames.  With only 250 rows of data on hand, one shouldn't expect anything amazing to pop out in terms of statistical significance, but we'll make a few observations:

*Over the last year, the market performance in the previous session has had little bearing on what happens in the next session.  Nor has there been any strong tendency to gain or lose on particular days of the week.  This is at odds with historical tendencies.

*The tendency for the market to gain toward the end of the month has been upheld over the period, though the statistical significance is not overwhelming.

*The strongest predictor of gains in the next session was this:  a high "corr" stat for the overall market.  In other words, when we average the "corr" values for all stocks, and this average is particularly high, the market tends to gain in the next session.  This indicator, by the way, measures the tendency of a stock to follow the movements of other stocks...a low value would indicate that the stock in question is "detached" from the behavior of other stocks.

*The performance of the market in extended hours has had little influence on the outcome of the regular session.

June 10:  The Dow gained .1%, Nasdaq lost .7%.  Our own take on the market had it up just a tad.  Separation between groups was 2%.

Gainers were led by stocks with a large high-close differential (+1.2%).  Historically, that's been a potent indicator of gains, but it hasn't appeared in our tables with great frequency of late.  Recent losers, yearlong losers, retails, and transports were strong today.

On the losing side, semiconductors dropped around .6%.  Otherwise, there weren't any particularly noteworthy trends to speak of.

The above trends offer contradictory clues as to the direction of Monday's market...semiconductors were weak, but the general market gained, with a smattering of bottom-fishing.  We'll refrain from a prediction.

June 9:  The Dow gained .3%, Nasdaq .8%.  Separation between groups was 2.6%.

As with yesterday, semiconductors led the way...up 2.7%.  The trend toward losses in losers, however, reversed...Tuesday's losers, recent losers in general, and three month losers were all strong.  Oils fared nicely.

We didn't identify any groups that actually lost money.  Non-volatiles in general were weak...up .2%.  Raw material manufacturers and refiners were weak.

The above trends are positive for the next session.

June 8:  The Dow lost .1%, Nasdaq .4%.  Separation between groups was 2.1%.

Despite the losses in Nasdaq, semiconductors emerged as our strongest stocks today...up .3%.  REIT's, dividend-payers in general, non-volatiles, and yesterday's winners were all relatively strong.

On the losing side, we find some familiar trends...losses in yearlong losers (-1.8%), cheap stocks, recent losers, and small caps.  Stocks with negative p/e ratios got burned, as well as stocks with high institutional holdings.

The above trends are generally negative, but the gains in semiconductors is a bright spot...we'll refrain from speculating on the direction of tomorrow's market.

June 7:  The Dow was up .1%, Nasdaq lost .4%.  Separation between groups was 2.5%.

Nothing particularly significant emerged on the positive side of the market.  Banks and REIT's were relatively strong...up around .6%. 

Losers did show some focused activity...cheap stocks led the list with losses of 1.7%.  Stocks with negative p/e ratios or low profit margins were weak.  Recent to three month losers were all weak.  Volatile stocks in general were weak.  No industry groups appeared on the losing side of the tables.

The selling of volatile stocks is a bearish trend...the next session has a 55-60% chance of closing with losses.

June 6:  The Dow was up .1%, Nasdaq .2%.  Separation between groups was a mere 1.8%...the lowest figure we've seen for a while.

Mid-cap stocks were our strongest group...up as much as 1.1%.  REIT's were strong.

On the losing side, we see fundamentally unsound stocks...those with low profit margins or high PE ratios.  Biotechs were weak.  Yearlong losers were weak.  Stocks with heavy recent losses continued to lose.  These trends appear to be a continuation of the activity we saw last Friday.

The above trends offer little in terms of suggestions for the direction of tomorrow's market...we'll refrain from offering a prediction.

*******************

Below, we discuss daytrading.  Those of you who disdain, dislike, or otherwise refrain from daytrading may still wish to read on, as some of our thoughts may still have relevance to you.

When looking over historical data with the intent of finding strategies that result in nice day-trading gains, how exactly does one measure gains over one day?  You can try to find predictors of gains from yesterday's close to today's close.  You could look only at gains from today's open to today's close.  You could even focus only on afterhours gains, although I think it's unlikely anyone is making serious money trading stocks day after day exclusively in the afterhours.

In many ways, it's more realistic to measure gains from open to close.  Daytraders normally make a point of closing their positions before the market close, so anyone who's interested in finding optimal daytrading strategies is probably not particularly interested in discovering strategies that are supposed to result in gains from close to close (i.e. from yesterday's close through today's open to today's close).

We've been running some tests, and here the philosophy of closing positions before the market close is strongly validated.  Why?  Because the afterhours have a nice way of reversing the gains or losses that you saw in the regular session.  If the stock goes up in regular trading, it'll tend to go down in the afterhours.  And if a stock goes down in the afterhours, it'll tend to go up yet again in the next session. 

I do wonder whether it makes sense for a daytrader to close a losing position at market close.  It might make better sense to wait for the next open to sell. 

Things get a bit complicated.  If you measure gains from close to close, as we've been doing for the most part, bottom-fishing tends to work well...if a stock has lost from yesterday's close to today's close, it tends to fare well over the next close-close period.  Problem is, not many folks are buying and selling over that time frame, for good reason...if you have nice daytrading gains in the regular session, why would you want to hold that stock over a period (the afterhours) when those gains would tend to be diminished?

Now, imagine a trader who has a two-day time frame.  He buys at today's open and sells at the next day's close.  If his stock gains today, it'll tend to drop during afterhours, and then rebound again in tomorrow's regular session.  What would you rather have...two gains gotten by intelligent daytrading in the regular hours, or two gains plus one reversal?  Worse yet would be a trader who buys at yesterday's close and sells at tomorrow's close...two gains and two reversals. 

What I'm pointing at here is that there's a quick drop-off in profitability if you go beyond a one-day daytrading frame.  Whatever the optimal trading solution is for gains over a two day period is, I doubt it beats (or comes anywhere near) the gains gotten by two days of intelligent regular-hours-only daytrading.  To put it more strongly, don't buy stocks with the intention of holding for just a few days.  Either daytrade during regular hours, or look to a longer term strategy!

Of course, everything we've said above hinges on this notion that the afterhours is a period of reversals.  In the next couple weeks, we'll be posting the results of a number of tests, and you can see for yourself what we're talking about.  We've also initiated a new day-trading test that is relevant to the discussion above.

June 3:  The Dow lost .9%, Nasdaq 1.3%.  Separation between groups was only 2.1%.

Oil stocks were the strongest group today...up .3%.  Groups that resisted losses well included REIT's, metals and mining, and non-volatile stocks in general.

The losingest group was that containing stocks with large three month losses...down 1.8%.  Yearlong losers, cheap stocks, volatiles, and biotechs lost in excess of the general indices.  These short-term trends reverse the trends of May, but do conform to standard June behavior.  Of course, it's quite early to start looking for a wholesale reversal of the trends of the last month or so, but we'll take every clue the market gives us.

The above trends are negative for the next market session.

June 2:  The Dow was flat, Nasdaq gained .5%.  Separation between groups was 2.6%.

Semiconductors were our best performing group...up 1.7%.  Stocks with unusually heavy volume in the last couple of weeks gained nicely.  3 month to 1 year losers were strong, but 1 month winners were also strong.  Retails and transports fared well.

On the losing side, banks lost .9%.  Oils were weak, as were dividend-payers in general.

The above trends are positive for the next session.

June 1:  The Dow gained .8%, Nasdaq .9%.  Separation between groups was 2.3%...despite the nice gains on the day, stocks moved pretty much in sync.

Oils led the way today...up 2.4%.  Small-caps, cheap stocks, lightly shorted stocks, stocks with low institutional ownership, and yesterday's losers were strong.

We didn't identify any groups that actually lost money.  Transportation-related stocks were weak (+.5%), as were 3 month gainers, software stocks, and biotech.  Stocks that strongly outperformed their trading pairs yesterday were weak.

Despite the gains, we're not overly impressed with the bullishness of today's market...we'd like to see gains in volatile stocks.  We'll refrain from speculating on the direction of tomorrow's market.

**************

We've got our data for the month of May.  Our own take on the market had it up a nice 5.8%.

The month presented us with a reversal of the predominant trends of the previous 4 months of the year.  The best performing groups we identified were those containing the most volatile of stocks...these stocks gained as much as 12.5%.  Stocks with negative p/e ratios were right behind.  Semiconductors and three month losers also gained in excess of 10%.  Cheap stocks fared well.  All of these trends reverse previous, longer-term trends.

We didn't identify any groups that actually lost money.  Metals and mining stocks were weak.  Non-volatiles and stocks with decent-sized gains over the previous three months fared poorly.

The above behavior is fairly typical for May...one is led to believe that June might also evolve in standard fashion.  On the other hand, some of the groups that prospered in May had taken a nasty beating over the longer term...it's quite possible that some of the trends we've seen still have some life.

****************

We have the second half of May up about 4%.

Stocks that fared well in this period were stocks with recent to 3 month losses...up as much as 10%.  Volatile stocks in general were strong.  Oils were strong after risk adjustment.

On the weak side, we find biotechs, which were essentially flat.  Banks were weak as well.  The smallest of small caps underperformed.  Stocks with large profit margins or dividends lagged.

All these trends match May h2 2004 trends quite closely...compare the tables yourself!  For what it's worth, June 2004  was dominated by industry trends...oils, metals, transports, and healthcare stocks had decent gains.  On the weak side were tech stocks of just about every flavor.  The May tendency toward gains in beaten-up stocks reversed.  Volatile stocks were best avoided.

May 31:  The Dow lost .5%, Nasdaq lost .7%.  Separation between groups was 2.5%.

Strong stocks included those with short term averages well below longer term averages (+.8%), three month losers, and stocks with negative profit margins.

On the losing side were biotechs (-1.4%), and stocks with heavy volume or large gains on last Friday's session.

The above trends are slightly negative for the next session.

May 27:  The Dow gained .1%, Nasdaq .2%.  Separation between groups was 2.1%.

Oils led the way today...up 1.4%.  Small caps, volatiles, Wednesday's gainers, and 1 month and 3 month losers fared well.

Nothing of great significance emerged on the negative side.  Monday's big gainers were weak, as were stocks trading well above their 20 day averages.

The above trends are positive for the next session.  The fact that the next session follows a holiday also boosts the chances of an upward-moving Tuesday.

May 26:  The Dow gained .8%, Nasdaq gained 1.0%.  Separation between groups was 3%.

As with yesterday, stocks trading well below their primary resistance levels were the strongest...up as much as 2.9%.  Cheap stocks, losers over just about any time span, and volatile stocks were also strong.

REIT's were our weakest group, actually losing a tad on this very positive session.  Non-volatiles in general were weak.

The above trends constitute the most bullish session we've seen for a while...one would certainly have to lean towards another positive session tomorrow, with the minor qualm that of all days of the week, Friday is the one that is most likely to reverse.

May 25:  The Dow lost .4%, while Nasdaq lost .6%.  Separation between groups was 2.3%.

Stocks trading well below their primary resistance levels were our best stocks today...up as much as .5%.  3 month losers, cheap stocks, and yesterday's winners were all relatively strong.  Despite the negativity, volatile stocks actually wound up the day with gains.  Utilities stayed above water.

Stocks with 1 month gains well above those of their best trading partners topped our list of losers...down 1.7%.  Small caps were weak (note that cheap stocks were strong, however).  Biotechs were hit.

The above trends are mixed as predictors for the next session...the overall losses are a negative, but the strength of volatiles is positive.

May 24:  The Dow lost .2%, while Nasdaq gained .2%.  Separation between groups was 2.3%.

Today's strongest group was stocks that have diverged from their best trading partners over the last month...up 1%.  Semiconductors followed closely.  Oils, yesterday's big gainers, and stocks with a history of gains in this time slot fared well.

Losers were topped by stocks that have shown strong increases in volume over the last 3 days...down 1.3%.  Stocks with a history of weakness in this time slot continued to lose.  REIT's, biotechs, and Friday's gainers were weak.

The above trends are mildly positive for the next session. 

May 23:  Both the Dow and Nasdaq gained .5%.  Separation between groups was 2.3%.

Friday's trends reversed today...our list of winning groups was led by stocks trading well above their 100 day moving averages (+1.3%).  Oils and yearlong gainers were strong.

Stocks that have taken large losses over the last year were weak...down 1%.  Stocks with high p/e ratios and those with big gains on Friday took relatively large losses.  The most volatile of stocks were weak.

The above trends are neutral for tomorrow's session....the gains in the general indices are a positive, but the trend toward losses in volatiles is a tad disturbing.

*******************

We've been toying with data from biotech stocks.  If you pay attention to this group, you know that monster one day gains and losses are far more common amongst these stocks than most other stocks.  Typically, the gains come when the FDA approves a drug, and the losses come when a drug "fails" a clinical trial.  Investors often have a pretty good idea...sometimes to the day...of when the results will come out.  What they don't know is whether the results will be positive or negative.

Of course, some folks do have a fair idea about the results, whether through illegal activities, or through sheer diligence (e.g. polling doctors who are involved in clinical trials).  The question arises:  are there telltale signs in a biotech's trading activity that might help an "ordinary" investor discriminate between the two situations?

We used our software to search for biotech stocks with monstrous gains or losses over the last 12 years.  We identified 90 monstrous losers (single day losses greater than 35%) and 95 gainers (gains greater than 40%) and then looked at the trading conditions prior to these large moves.

If there's a secret, it's this:  find a stock that closed quite a bit above its low on the day prior to the big day.  Here, the opposite also applied...if the stock closed near its low, that would be an ominous sign.  In theory, a trader should still be able to take advantage of this indicator by trading in after-hours or just prior to the close.

According to the data, a strong monthlong performance prior to the "big day" predicts the big gain.  Sorting our 185 stocks according to monthlong gains, the first stock that wound up on the losing side on the big day was 24th (!) on the list (Immune Response, more than 10 years ago...the stock gained 45% in the month just prior to its big loss).  The opposite applied, but only weakly...some of the stocks with large single day gains performed quite poorly in the month prior to the big day.  There's a problem here, though:  about 5 years ago there was a period where a number of biotechs had monster gain after monster gain...these gains were more connected to investors climbing over each other's backs at the height of a bubble, than to pre-knowledge of an important announcement.  Excluding stocks from this period, large monthlong gains do not predict strong performance on the big day.

Three month or 1 year losses actually tended to predict gains, not losses.  Cheap stocks and the most volatile of stocks also fared well...it may be that investors tend to overestimate the risk versus the reward in these situations.

As is often the case, increasing or decreasing volume really didn't offer any clues.  Once again, volume appears rather over-rated as a predictor.

We also generated some charts that show the trading patterns of the typical biotech that has just taken a large single day loss.  Take a look.  The next project is to generate charts of biotechs just after a big gain...as you might imagine, it's a fairly tedious exercise to gather all this data, check it, normalize the prices, average the prices, and generate the charts...but we should upload this page in the next few days.

May 20:  The Dow lost .2%, while Nasdaq gained .2%.  Separation between groups was a surprisingly low 1.6%.

Our strongest stocks were those trading well below their second most prominent resistance levels...up .9%.  Yearlong losers, which overlap strongly with the aforementioned indicator, gained .8%, continuing yesterday's gains in the group.  Volatiles, transports, and stocks whose movements are weakly correlated with other stocks all fared well.

Nothing of significance emerged on the losing side.  Despite the gains in the Nasdaq, small-caps were relatively weak.  Recent gainers were weak.  Oils lost around .5%.

The above trends are weakly positive for Monday's session.

May 19:  The Dow gained .3%, Nasdaq .6%.  Separation between groups was 2.4%.

Stocks with short term moving averages well below their 20 and 100 day averages led the way, today...up as much as 1.5%.  Volatiles and software stocks were strong.

On the losing side, biotechs lost .9%, though monster losses at a company called "Able Labs" were entirely responsible.  Stocks with nice gains over the last 3 months were weak, as were heavily shorted stocks.

The above trends are positive for the next session.

May 18:  Both the Dow and Nasdaq gained 1.3%.  Our own non-weighted look at the market had it up 1.9%...small caps were strong.  Separation between groups was 3.3%.

Stocks with a low "break_ave" indicator (those whose short term moving averages are well below their longer term averages) topped our list of gainers...up as much as 3.9%.  Oddly, the 4% of stocks with the lowest p/e ratios (normally, a dowdy, non-volatile group) gained 3.2%.  These gains were quite evenly distributed...no single stock could take responsibility for this strangeness.  One month and three month losers were strong.  A broad grouping of volatiles was strong, but the most volatile 4% of them was actually found on the weak side of our tables.  Transportation-related stocks were strong.

No groups actually lost money.  Non-volatiles, the weakest group, gained .7%.  Oils, utilities, and large caps were all relatively weak.

The above trends are positive for the next session.

May 17:  The Dow gained .8%, Nasdaq .4%.  Separation between groups was 2.5%.

Today was a day of reversals of recent trends.  Oils were are strongest group, bouncing back from yesterday's poor performance...up 1.8%.  Stocks with a high "corr" indicator were strong...currently, banks and oils are heavily represented in this group.  Stocks with recent losses were strong.

On the losing side, stocks with large yearlong losses dropped as much as .7%.  Stocks with high or negative p/e's were weak.  Biotechs lost a tad.  All these losses represent reversals of the more general trends this May.

The above trends are neutral for the next session...the gains in the indices are positive, but the fact that volatile stocks did not partake in the gains is somewhat negative.

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As our subscribers probably have noticed, we're generally not fond of the chart-watching style of technical analysis.  But we're certainly not opposed to testing some tenets of technical investing with an open mind.  One common theme seems to be that stocks that have a long recent "base" are apt to "breakout".   Using our data, it's not difficult to seek out such stocks...open our current data file up in Excel, divide "stdev" by "recent_std", and seek out stocks with a high result.  Many, though not all, of these stocks will have a rather flat recent performance, preceded by a more volatile period.  A word of caution:  some of these stocks are waiting for a merger to be completed, so it's only natural to see a very flat recent chart.

Anyway, we crunched about 20,000 lines of data going back to 1988 and applied the above operation.  The result:  in terms of predicting 1 day or 10 day gains, a "strong" recent base did not seem to predict big gains (or losses, for that matter).  It's possible that stocks with an impending merger biased the data, so we took another step:  we multiplied the above column by the previous day's gain.  Stocks with a large gain or loss in the previous session are unlikely to be waiting for a merger to complete.  Still, we didn't see any strong tendencies to gain or lose when this figure is large.  Finally, we took this last figure and multiplied it by our "vol1_3" indicator...so now we have a stock with a "strong" base, and a fairly large move upward in the previous  on increasing volume (the first day or two of a possible "breakout").  Still...this new indicator didn't seem predict gains or losses with any significance at all.

Tinkering with the data, as we're apt to do, we noticed that volatile stocks have had a tendency to perform particularly well in the second half of a month.  We're surprised that we hadn't noticed this before.

Another observation, though it shouldn't be surprising coming from us...with better than 60 indicators for every one of 20,000 rows of stocks examined, a disproportionate number of the best predictors of gains and losses involve seasonality in one way or another (e.g. buying volatile stocks in November and December is a good strategy for 10 day gains).  We've got indicators for volatility, gains over a period of one day to one year, volume indicators, moving averages, market cap...and much more...but seasonal considerations often seem to predominate when analyzing a large randomized body of stock data.

May 16:  The Dow gained 1.1%, Nasdaq .9%.  Our own take on the market had it up 1.5%...small caps were strong.  Separation between groups was 2.9%.

Our strongest group was transportation-related industries...up 2.8%.  Banks, recent losers, and small caps all gained in excess of 2%.  Stocks that lost in this time frame last year were strong today.

Only one group actually walked away from the session with losses...oils (-.1%).  Non-volatiles, large caps, and broadcasting-related stocks were relatively weak.

The above trends are positive for the next session.

May 15 (Sun):  Here's a link to a short essay on the subject of "herd thinking" at the Scientific American website.  Several instances are cited whereby group-think actually produces better results than individuals.  On an individual basis, guessing at the number of jelly beans in a jar might yield some horrendously off-target results, but if you take the average of all guesses you're likely to arrive at a number quite close to the actual number of jelly beans.

Another example relates to the Challenger disaster of nearly 20 years ago.  Despite a public debate that went on for weeks on the causes of the disaster, the market wasted no time sorting out the culprits (correctly):  Thiokol was immediately punished to the tune of 12%, while a number of other manufacturers (whose parts could also have been faulty) suffered to a much lower extent.  This example seems a bit tenuous to me, but I won't bother dissecting it.

In the end, the article summarizes conditions under which group-think tends to prevail:  For a group to be smart, it should be autonomous, decentralized and cognitively diverse.  The next time the market or a particular stock goes wild, it might prove beneficial to keep these words in mind.  Decentralization and cognitive diversity might refer to the extent to which a stock is held by a small number of institutions.  The "autonomous" part is more difficult...but the question, I think, is "to what extent are traders free to make rational decisions", unburdened by hopes, fears, and the inputs and expectations of others.

May 13:  We've got our data for the first half of the month.  We have the general market up about .8%.

Bottom fishing and junk-reclamation seemed to be the ways to go over the last two weeks.  Stocks with high or negative p/e ratios led the way, with gains around 5.5%.  These stocks have received frequent mention on this site in the last few months...as big losers.  Stocks with negative profit margins, biotechs, and three month to one year losers were strong. 

On the losing side, we find oils...down 4.5%.  Stocks with a history of May h1 losses lost again.  Those that entered the month with recent losses continued to lose.  Expensive stocks were weak.

Looking for May h1's that look similar, May h1 1997 and 2003 offer nice parallels...nice gains in long term losers, semiconductors, and volatiles, and losses in expensive stocks.  In both these cases, the trends continued nicely through the rest of the month, without any reversals to speak of.

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We've been thinking about our "inertia" indicator a bit.  Here, we try to get an idea of a stock's tendency to "stick" at various resistance levels.  You can sort through stocks in our daily update file according to this indicator...the results can be interesting.

If you're intent on buying an unhedged call option, which stock would you rather choose?...one with high volatility and a tendency to plateau at various resistance levels, or one with high volatility and a low tendency to "stick"?  Most likely, you'd go for the stock that isn't likely to get stuck.

There is a counterargument to the above, however...technically-oriented guys might want to choose a "stuck" stock that has a history of volatility, in the hopes that it's on the verge of a "breakout".

We are making an assumption...a "sticky" stock is likely to be sticky in the future.  We can put that assumption to the test in the future.

What we're hinting at is simply this:  subscribers might want to pay special attention to this indicator when thinking in terms of option strategies, or when screening for potential "breakout" candidates.

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The Dow dropped .5%, while Nasdaq actually gained .7%.  Our own take on the market actually had it down .7%...these divergences are explained by strongly focused gains in semiconductors.  Separation between groups was 3.7%.

Semiconductors gained as much as 1.6%.  Yesterday's winners (largely semiconductors) fared well.

On the losing side, where the bulk of stocks was to be found, were yesterday's losers (down 2.1%), followed closely by oil stocks, cheap stocks, and one-month winners.

As with yesterday, the signals are mixed for the next session...the gains in semiconductors are nice, but the general weakness of the market is negative.

May 12:  The Dow lost 1.1%, Nasdaq .4%.  Our own take on the broad market had it down 1.1%.  Separation between groups was a fat 4.2%.

We identified only one group (out of more than 1500) that gained today...semiconductors (+.2%).  Non volatiles and stocks that trade as "free agents" (a low "corr" indicator value) fared relatively well. 

The action on the negative side of our tables was dominated by oils, which lost 4%.  Yearlong gainers, heavy in oils, lost large percentages as well.  Stocks with a high "corr" indicator value were weak.

The signals for the next session are mixed...on one hand we like the strength in semiconductors, but on the other the general weakness in the market is a negative.

May 11:  The Dow gained .2%, Nasdaq .5%.  Despite the Nasdaq's stronger performance, our own read of the market had it flat...large cap stocks were strong today.  Separation between groups was 2.2%...one of the more meandering, uninspired sessions we've seen of late.

Nothing particularly significant emerged on the positive side of our tables.  Stocks that are strongly correlated with the motions of others stocks were strong.  

On the negative side, things were more well defined...we saw profit taking in three month losers, stocks trading well below their predominant resistance levels, volatile stocks, and last Friday's losers.

No industries at all appeared in our tables today!

The above trends are slightly negative for the next session.

May 10:  The Dow lost 1%, Nasdaq .9%.  Separation between groups was 2.8%.

The few groups that actually gained today were led by stocks with strongly negative profit margins...up .4%.  Stocks with high or negative p/e's were also strong. This maintains the recent trend towards gains in "junky" stocks.  Biotechs, 1 month gainers, stocks whose movements are not strongly correlated with the movements of other stocks, and non-volatiles in general held up well.

On the losing side, one month losers lost as much as 2.4%.  Metals and mining stocks, cheap stocks, yesterday's winners, and stocks that are strongly correlated with other stocks, all lost at least 2%.

The above trends are weakly negative for the next session...we say "weakly" because there wasn't a strong trend toward profit-taking in volatile stocks.

May 9:  The Dow gained .4%, Nasdaq .6%.  Our own non-weighted take on the market had it up 1.00%...small caps fared well.  Separation between groups was 2.8%.

Stocks with high or negative p/e's led the way today...up as much as 2.8%.  Other strong groups included Thursday's big gainers, biotechs, volatiles, and those with strong recent momentum. 

On the losing side, nothing of great significance emerged.  Despite the general trend for small caps to prosper, the data shows that the very smallest of the small caps actually lagged...up as little as .3%.

The above trends are positive for the next session.

May 6:  The Dow gained .1%, Nasdaq .3%.  Separation between groups was a weak 2%.

Non-dividend paying stocks topped our list of gainers...up 1.2%.  Some explanation is in order here...since most stocks don't pay dividends, what does it mean when our program discovers (as it did today) that the 13-16 percentile of stocks, sorted by the size of annual dividends, contained the best performing stocks.  After all,  the 1-4, 5-8, and 9-12 percentiles also contain stocks with dividends of zero.  Well, our computer sorts the non-dividend payers randomly, and it just happened to stumble on a random grouping of about 80 non-dividend payers that performed well.  Note that the table shows a 12% chance of this result being a fluke.  Note again, however, that this grouping of stocks isn't entirely random...dividend payers are excluded from this group.  Finally, note that dividend payers find themselves on the negative side of our tables today.  Interesting.

Some semblance of the recent bottom-fishing atmosphere was maintained today...yesterday's losers, monthlong losers, and semiconductors fared well.  One year gainers were also strong.

On the negative side, the aforementioned dividend-payers lost .8%.  Yearlong losers were generally weak.

The above trends are weakly positive for the next session.

May 5:  Over at CBSMarketWatch.com , Mark Hulbert has some thoughts on the "sell in May and stay away [for six months]" strategy.  Historically, this period of the year has been a bad time to own stocks.  The question he addressed was whether a weak six months prior to the "sell in May" period alters the dynamics of the strategy (might we expect a relatively strong May-October this year, given the lousy performance of the market over the last six months?). 

Looking at Dow data, he observes that the Dow has lost money in 43 of the Nov-May periods going back to 1896.  In these instances, the Dow lost 13 times (13/43...30% of the time) in the following May-October period.  Percentage-wise, he found that the Dow lost 35% of the time following a strong Nov-May showing.  He then concluded that the market's Nov-May performance has no bearing on the May-Oct performance.

We'll accept that.  However, one should note that if the Dow loses 35% of the time after a strong Oct-May period, and 30% of the time after a weak Oct-May period (with the Dow only being sliced into those two categories...it's either strong or weak), it's clear that the Dow has lost less than 35% of the time during the time of the year when you're supposed to be putting your money into bonds (or whatever the accepted wisdom is).

Of course, if a handful of the historical May-Oct periods lost in a very big way, that could mean that the period has been unprofitable for investors.  But then, of course, one has to question the significance of a "trend" that has been skewed by just a handful of exceptionally rotten May-Oct performances. 

No need to speculate about the above, actually.  Just take a look at our Dow seasonal charts going back to 1929.  Note that if you'd divested your stocks precisely at the early May peak, and re-entered the market precisely at that late October trough, the market would have been flat and you could have done better by putting your money in bonds.  But you've really got to "cherry pick" that period with precision.

We've commented about the "sell in May" strategy on numerous other occasions.  It certainly has been an uninspiring time of the year to buy a big index like the Dow, but we've identified any number of sub-groupings of stocks that have fared well during the period.  Looking at the seasonal chart, it's also apparent that there is a June to late August "sub-period" that has fared well.

At the risk of blathering, we'd also question, for the umpteenth time, whether it really makes any sense at all to be dredging up market data from the late 1800's when you're trying to aid investors in their buy-sell decisions in the year 2005.

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The Dow lost .4%, while Nasdaq was flat.  Separation between groups was 2.5%.

Despite the flatness of the session, the speculative character of the last few sessions remains...this time, stocks with negative p/e's topped our list of gainers...up 1.4%.  Biotechs gained 1.3%. Yearlong losers were strong.  Volatile stocks outperformed the general market.

On the losing side, nothing of great significance emerged.  1 month losers were weak...down as much as 1%.  Cheap stocks, and those with low insider holdings were down.

The above trends are positive for the next session.

May 4:  The Dow gained 1.2%, Nasdaq 1.5%.  Separation between groups was a hefty 4.4%.

As with yesterday, winners were led by stocks trading well under their 100 day moving averages...up a nice 4.6%.  Just to make sure that one or two stocks didn't skew the data, we took a look...a stock by the name of "Renovis" popped around 100%, accounting for about 1 point of that 4.6% (i.e. you'd see 3.6% gains without that stock).  Otherwise, the gains were spread around in a fairly uniform way...31 of the 80 stocks we looked at (in that particular grouping) gained better than 4%.

Volatile stocks in general were strong.  Biotechs gained around 3.6%...again, though, Renovis is a biotech.  No other industries appeared in our tables today...the driving forces today were not industry-based.

We didn't identify any losing groups.  A couple proprietary indicators predicted gains as weak as .2%.  Outside the proprietary indicators, non-volatiles were weak.

The above trends are positive for the next session.  The two day trend toward bottom-fishing is definitely worth paying attention to...a skeptic might note, however, that the statistical significance of the trend wasn't horribly strong today (p = .08...an 8% chance of being a fluke).

May 3:  The Dow gained .1%, Nasdaq .2%.  Separation between groups was 3.2%.

Winners were led by stocks trading well under their 100 day moving averages (+1.5%).  In fact, the winning side of our tables was dominated by 1 month to 1 year losers in various guises (e.g. a low "resist1" indicator, which overlaps strongly with yearlong losses).  Stocks with negative p/e ratios fared well.  Small caps were weak.  It's definitely worth keeping an eye on these developments, as they represent a divergence from market activity of the past 4 months.

It's interesting to note that no industry groups were represented on the winning side of our tables.

On the losing side, oils topped the list...down 1.7%.  Stocks with a high "corr" value (stocks which are strongly correlated with the trading activity of other stocks) were weak.

The above trends are weakly positive for the next session...the evidence of bottom-fishing is nice, but we'd also like to see gains in the most volatile of stocks, an event that did not transpire today.

May 2:  The Dow gained .6%, Nasdaq .4%.  Separation between groups was 3.1%.

Stocks with a large high-close differential led the way, as is often the case...up as much as 2.7%.  Volatiles, stocks with negative p/e's, small caps, cheap stocks, and oils were strong.  Stocks with heavy institutional holdings were strong, telling us that big money fueled today's action to a greater extent than normal.

On the negative side, software stocks were weak, losing .3%.  Non-volatiles fared poorly.  Three month losers were weak...despite today's action, bottom fishing was not a strong strategy.

The above trends are positive for the next session.

May 1 (Sun):  We crunched our data for the second half of April.  We've got the market down about .5%...most of the damage was in the first half of the month.  Some interesting trends emerged, though we won't claim that we have a full understanding as to what's going on.

REIT's led the winners...up about 4% in this short time span.  Obviously, the gains are all the more impressive after risk-adjustment.  Dividend-payers in general were strong.  Non-volatile stocks in general gained, while volatiles lost.  What we found particularly interesting was the fact that stocks whose behavior is strongly tied to the behavior of other stocks (a high "corr" value) tended to gain, while those whose movements aren't strongly tied to other stocks were weak  Interesting.

Outside the above-mentioned losers, stocks with a recent history of losses continued to lose...it was a bad time to be a bottom fisher.  Cheap stocks lost as much as 4%.  One month to three month losers were hurt.  Retails suffered, reversing several months of upward action.

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We've crunched data for the month of April.  We were surprised by the losses over the month...about 5% for the general market.  It seems that a number of very positive days masked the more general trend toward losses.

Our list of winners was topped by REIT's, which gained almost 3%.  The gains were all the more potent after risk-adjustment.  Naturally, dividend-paying stocks fared well as well. Non-volatiles and expensive stocks were relatively strong.

On the losing side, cheap stocks topped our list, losing as much as 13%.  Volatiles, yearlong losers, and tech stocks in general (semiconductors, hardware, scientific products, etc.) were hurt.

Apr 29:  The Dow gained 1.2%, Nasdaq .9%.  Separation between groups was 2.9%.

As is often the case, winners were led by stocks with a large high-close difference in the previous session.  Friday is the most likely day for a reversal of the previous day's trends, and that was definitely the case today...Thursday's big losers, cheap stocks, and volatiles were strong.  Biotechs fared well.

There were a number of groups that turned in losses, despite the day's positivity.  Retails led the pack...down .4%.  Stocks with a history of losses in this time slot were weak as well.

The above trends are positive for the next session....as we've stated before, we're using some lessons gleaned from historic data to make this judgments.  Obviously, such judgments have been less-than-helpful over the last few weeks of topsy-turvy market action, so one might want to temper our predictions with this knowledge.

Apr 28:  The Dow lost 1.3%, Nasdaq 1.4%.  Our own take on the market had it down 1.8%...small caps were again victimized.  Separation between groups was 3.3%.

Stocks whose behaviors are not strongly tied to other stocks (a low "corr" value) were our strongest performers...down .5%.  Non-volatiles, recent winners, last Friday's big gainers, healthcare stocks, expensive stocks, and dividend-payers were relatively strong.

On the weak side, cheap stocks were punished to the tune of 3.9% losses.  We checked to see if one or two big losers were responsible, but the trend toward losses in the group was quite broad.  3 month losers were hurt.  Volatile stocks in general were weak.    Again, those with poor fundamentals were victimized.

The above trends are negative for the next session.

Our next update will be on Sunday, for technical reasons.  It's the end of the month, so we'll be coming out with our summary of trends over the last month and half month...should be interesting.

Apr 27:  The Dow gained .5%, Nasdaq .2%.  Our own non-weighted take on the market had it down .1%...small caps were weak.  Separation between groups was 3.1%.

On the winning side, banks and insurance companies were strong...up as much as 1%.  Non-volatiles and stocks with strong fundamentals gained as well.

On the losing side, metals and mining lost 2.1%.  Oils were weak as well...down 1.6%.  Big yearlong losers and big yearlong winners were both weak...down as much as 1.3%.  Yesterday's losers continued losing.  Volatiles were weak.

The above trends are negative for the next session.

Apr 26:  The Dow lost .9%, Nasdaq 1.2%.  Separation between groups was 3.0%.

Only one group eked into positive territory...stocks with unusually high volume on Monday.  REIT's, non-volatiles in general, and retails resisted losses fairly well.  As with yesterday, stocks with high insider holdings were relatively strong...it's interesting to note such trends in the current market, which has made a habit of reversing the previous day's gains for a couple weeks now.

On the losing side, where the action was, stocks with a short-term moving average well below the longer term average got burned to the tune of 2.9%.  Cheap stocks, volatiles, monthlong to yearlong losers, and transports took hits as well.

Given the topsy-turvy nature of the current market, it's risky to make predictions on the market, but our usual algorithm says that tomorrow is more likely to lose than to gain.

Apr 25:  The Dow gained .8%, Nasdaq 1.0%.  Separation between groups was 2.4%.

Big gainers included stocks with a large high-close differential in the previous session (+2.4%), Friday's big losers, recent losers in general, those with heavy insider holdings, stocks with strongly correlated "trading pairs", oils, and those with large yearlong gains.

On the weak side, Friday's big gainers were essentially flat.  Small caps were weak.  Industries were not represented at all on the losing side of our tables.

The above trends are weakly positive for the next session...we'd like to see more action in the most volatile stocks.

Apr 22:  The Dow lost .6%, Nasdaq 1.5%.  Separation between groups was 3.5%.

Again, today's market was characterized by reversals of the previous day's behavior.  Clearly, the market has an identity crisis, and needs psychological intervention (hey, everyone else anthropomorphizes the market) .  REIT's, which were weak yesterday, were the only group that showed gains today (0.1%).  Non-volatiles, dividend-payers, and expensive stocks also held up well. 

Cheap stocks were our worst group...pummeled to the tune of 3.4%.  Yesterday's big winners, computer hardware and scientific device manufacturers, and volatile stocks in general were hit with fairly large losses.  Semiconductors were hurt, but didn't appear in our tables...they held up a tad better than might be expected.

If you've got a mechanical trading scheme, you'd have to predict losses on Monday, given today's action.  On the other hand, the "mini-trend" has been for reversals to occur.

Apr 21:  The Dow gained 2.1%, Nasdaq 2.5%.  Separation between groups was 3.8%.

Stocks that finished yesterday with the highest "high-close" difference were our strongest group...up a nice 4.3%.  Yearlong losers came in second (4.2%), with semiconductors just behind.  There's a good deal of overlap between these two groups, of course, but it would probably be more apt to describe today's action as bottom-fishing than selective industry-based buying in semiconductors.  Yesterday's losers and cheap stocks were strong as well.  It's interesting to note that the most volatile stocks did not make our top 10 list today.

No groups emerged with losses.  Non-volatile stocks were weak, gaining as little as .5%.  REIT's only gained about .8%.

The above trends are positive for the next session.

Apr 20:  The Dow lost 1.1%, Nasdaq 1.0%.  Separation between groups was 3.1%.

The session felt like a return to the nastiness of last week.  Some of last week's big losers resumed their losing course today.

No groups walked away with gains.  Stocks with fairly large losses over the last few days (judged by our 5 day moving average indicator) were down .4%.  Non-volatiles held up well.  Monday's weakest stocks reversed.

Given the above, today's losers are predictable:  stocks with big gains on Monday lost as much as 3.5%.  Volatile stocks and small caps were weak.

It's interesting to note that not a single industry group was found in our tables today!  Today's losses weren't fueled by profit-taking in particular industries...other concerns dominated.

The above trends are negative for the next session.

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We added a stock summary for Cisco.  This stock, of course, is a monster success story.  The stock has split 9 times in the last 14 years.  With the power of hindsight, we were able to identify one-day strategies that would result in average gains of 6%.  The simple strategy of buying the stock after sessions in which its industry group was particularly strong resulted in average gains of 3%.  A number of other momentum strategies were also indicated for short term gains.

One wonders, however, to what extent folks commit the fallacy of analyzing data only from outrageously successful stocks and then drawing conclusions about the "way" to trade stocks in general.  Scan the market for the most successful 1% of stocks and you're certain to find that momentum strategies would have worked well with them.

The question investors should really be asking is, "what strategies will work now, with the stocks I'm holding?"

To various extents, the stocks we list in our "stock summaries" are all success stories.  This should definitely be kept in mind when viewing the tables.

Apr 19:  For the "I can never understand why department":  At the end of the day, the big media technical guys whip out their charts and show you the Dow, Nas, S&P, Russell, and who knows what else.  Have they ever noticed that these big indices tend to move in sync?  What a tremendous waste of time to analyze the resistance levels, moving averages, Bollinger bands, aroons, oscillators, and who knows what other esoteric indicators, of each of these indices!

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The Dow gained .6%, Nasdaq 1.0%.  Our own take on the market had it up 1.3%...small caps outperformed again.  Separation between groups was 2.8%.

Winners were led by stocks that took a beating last Wednesday...up 3.1%.  Cheap stocks, last Thursday's losers, those with large 1 month losses, semiconductors, and volatile stocks in general were also strong. 

We didn't identify any groups that actually lost money.  Non-volatiles gained as little as .3%.  Banks were weak.  Stocks that held up well during last week's negativity fared poorly today.

This is the first truly bullish session we've seen in a while.  By "truly", we mean that all the right indicators clicked into place today...volatiles gained, non-volatiles were weak, bottom-fishing was evident, and the general market showed nice gains.  The probability of another positive session tomorrow is fairly high.

Given the change of climate over the last couple sessions, and the monstrous gains that could have been realized in the second half of some other Aprils, one's got to ask, "When is this turnaround real?".  Our answer is "we don't know".  And nobody else does either.  All we can say is that the probability of a nice run over the next few weeks, with volatiles outperforming, is certainly greater than normal.

Apr 18:  The Dow lost .2%, Nasdaq gained .3%.  Our own non-weighted take on the market had it up nearly .6%...small caps were strong.  Separation between groups was 2.6%.

Leading the winners were stocks with a large high-close differential last Friday...up 2.1%.  Metals and mining stocks were strong, as well as banks.  Recent losers bounced back.

Nothing particularly noteworthy emerged on the losing side of our tables.  Biotechs and drug companies were weak, reversing last week's surprising performance in the face of a good deal of market negativity.  Stocks with large recent to one month gains were weak. 

The above trends are positive for the next session, though we'd like to see the most volatile stocks appearing on the winning side of our tables, and non-volatiles appearing on the losing side.

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Now that we've compiled a handful of "stock summaries", we've put together a page that lists them all.  In the future, we'll add summaries to that page without a lot of hoopla on our diary page (this page).  If you enjoy these summaries, just open the stock summary page and check for our latest additions.

Apr 17 (Sun):  Here's a stock summary for Humana stock.  Here's a stock with a history, albeit statistically insignificant, of reversing last year's seasonal performance...e.g. if last June was negative, the next June has had a tendency to be positive.  We also added a "seasonal chart" for the company...the yearlong chart is unusually linear...not many humps of interest...a stock that has a tendency to reverse last year's performance, of course, would have this sort of chart.

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We also added a "seasonal chart" for Coldwater Creek stock (cwtr).  Browsing the internet, we espied a page where the seasonal characteristics of this stock are emphasized.  After all, the company itself derives 70% of its revenues from Christmas-related buying.  Our charts don't show any outrageous seasonal trends with this stock, however.  Unbeknownst to some, the market has a way of adjusting for this sort of seasonality in company revenues...nobody is surprised to see weak second quarter revenues with this company, and thus you don't see a stock that tends to drop in the second quarter (quite the opposite, actually).

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 I read a bit of Richard Ney's writings today.  It's awfully conspiratorial (the entire market is rigged, controlled by the specialists, so the only way the small guy can make a profit is to beat the specialists at their own game, blah, blah, blah).

I found some of his advice interesting, however.  He says the small investor should never place stop or limit orders, and the philosophy of cutting your losses and letting profits ride was invented by a broker.  He also says one should only buy stocks that have declined at least 35%.  There are also hints of seasonality in the writings...May is supposedly the best time for "bull runs" in a stock...somehow it's related to the April 15th tax deadline.

Obviously, your webmaster doesn't agree with a lot of the stuff this guy writes.  What's more, a lot of it is dated...it doesn't really apply to the modern market.  However, it's refreshing to see anyone cutting against the grain of accepted wisdom in the market...this is definitely not "CANSLIM".  As usual, no honest-to-goodness statistics are cited in his writings to back up what he says...just anecdotes about individual stocks. 

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Apr 16 (Sat):  Here's a "stock summary" for Best Buy stock.  The interesting thing here is that our tables show that the stock has truly responded well to momentum strategies, at least for short term traders.  A good indicator that the stock will fare well tomorrow is if it gained better than 2% today.  The nice thing about momentum stocks, versus good bottom fishing stocks, is that bottom fishing candidates cease to be good buys after they do what you want them to do (go up), whereupon you've got to sell.  Momentum stocks, on the other hand, don't become sells as soon as they make a decent move upward.

Here's a "stock summary" for Microsoft stock.  There's nothing mind-blowing here, but it's interesting, nevertheless, since a lot of the tendencies we see in other stocks apply here as well.  Once again, it seems to pay to buy the stock during periods of historical strength, even if you're looking for single day gains.

Here's a "stock summary" for GE stock.  The stock has a tendency to fare well around options expiration time...interesting, since a number of stocks are in the habit of doing exactly the opposite.

Apr 15:  The Dow lost 1.9%, Nasdaq lost 2.0%...the biggest losses in these indices for almost two years.  Although the losses were large, one didn't see much evidence of various groups diverging from the pack...separation between groups was 3.3%.

No groups escaped losses, but a number of retail stocks were essentially flat.  Biotechs again held up well...surprising in such a negative atmosphere.  REIT's were also a safe place to be.  Stocks with nice gains over the last month were strong.

The losing side, of course, is where the action was.  Here, our tables are topped by semiconductors, losing 3.4%.  There's definitely a "momentum" flavor to the recent negativity...stocks with large recent losses continued to lose. 

The losses, in and of themselves, are a negative sign for the next trading session.  The weakness in semiconductors is also worrisome.  However, it's heartening to see that the most volatile stocks are not being singled out for losses.  Traditionally, the middle of April (tax time) forms an inflection in the market...things could reverse in short order.  We'll refrain from speculating on the direction of Monday's market.

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We've got our data for the first half of April.  Our own non-weighted take on the market has it down about 3.5% over this period.

No groups that we identified escaped unscathed.  REIT's nearly did, however...they were down about .2%.  Healthcare and biotechs were relatively strong...the performance in the biotech group is a bit noteworthy when you consider how susceptible this group can be to negative market action.  Retails held up well.  Non-volatiles in general outperformed.

On the losing side, volatiles lost as much as 8%.  Semiconductors, one month to one year losers, cheap stocks, and volatiles in general were weak.

The closest match to Apr h1 2005, to our eyes, is Apr h1 1993.  April h2 1993 was a tad negative, but the behavior of monthlong to yearlong losers reversed nicely, handing 5%+ gains to those who were brave enough to go bottom fishing.

Apr 14:  Actually, we're writing this stuff pre-market on the morning of the fifteenth.  Never mind...

The Dow lost 1.2%, Nasdaq 1.4%.  Despite the losses, separation between groups today was a mere 2.1%. 

We didn't identify any winning groups, but non-volatiles lost a little as .6%.  Healthcare stocks held up well.  Yesterday's gainers avoided major losses.

The losing side was where the action was.  Topping the list were stocks with big yearlong gains...-2.6%.  This group has fared well for quite a while, but there have been some hiccups of late...we might be seeing the signs of a reversal here.  Data from the previous session showed hints of profit-taking in these stocks as well.  Are we simply seeing retail investors freeing up cash for April 15 or not?  Metals and transportation-related stocks were burned.  One trend that didn't lose steam, however, was that of high or negative p/e stocks losing.

Apr 12:  We'll be taking a very short break, so we won't be posting or issuing data until Friday morning.

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The Dow gained .6%, Nasdaq .7%.  Separation between groups was 2.5%, with a couple of industry groups leading the way up and down.

Some rather overlooked, dowdy industries...construction, containers, paper...led the market, gaining as much as 1.7%.  Banks and REIT's were also fairly strong, with soothing words coming from Alan Greenspan's mouth.  Small caps were relatively strong.  The market seemed to be leaning slightly in the direction of bottom-fishing, with Monday's losers coming back and stocks with moderate losses over the last three months reversing.

On the losing side, oils lost around .9%.  Not surprisingly, then, stocks with big gains over the last three months lost as well.  As an experiment, though, we looked at the performance of big three month gainers with oils excluded...the group was still fairly weak, gaining only .2%.  Yesterday's winners reversed.   Volatile stocks underperformed...given the general gains today, you would have expected them to fare better than they did.

The trends today give mixed signals as to the direction of tomorrow's market.  Greenspan's words came relatively late in the session, so the next session will probably be preoccupied with them.

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Did you know that Mark Hulbert, whose Hulbert Digest tracks the performance of various newsletters, counts a "hold" as a "sell"?

Good for him!

Why in hell would someone want to "hold" a stock if there were something better to "buy"?  Of course, there are commissions, but we're living in an age when commissions are dirt cheap..  They take only the smallest bite out of your profits if you're wise about choosing a brokerage.  Of course, if you're day-trading the commissions can still take a large chunk out of your profits, but analysts don't issue "buys" and "holds" for day traders. 

There are also taxation considerations, though how long do you want to hold on to something you consider to be garbage in order to avoid taxes?  The taxation argument might make sense if you're weighing the merits of selling a profitable stock late in the year...but have you ever heard an analyst justify his "hold" on seasonal grounds (e.g. it's a "hold" until the start of the new year, at which time it becomes a "sell").

I guess you could also justify the logic of a "hold" if there were absolutely no "buys" out there.

In fact, why would somebody "buy" a stock if another stock is a "strong buy"?

The amazing thing is how many brokerages and newsletters un-questioningly follow the practice of issuing "hold" signals.  Lack of original thinking is rampant in the world of finance. 

One thought would be for an innovation-minded brokerage to issue something like a "risk-buy" or "risk-adjusted buy".  Not very catchy, but a "risk buy" would mean something like "it's a great stock, we think it's going up, but it could get clobbered if the market turns sour", whereas a "risk-adjusted buy" would mean "we think the stock is going up, and it should resist losses well in a negative market climate".  Two kinds of "buys"...one for the speculator, one for the risk-averse investor.

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We've added another "stock summary" for Dupont.  We find these things fascinating...it's always enjoyable to generate the summaries and then discover the trading patterns of various stocks.

Some tendencies seem to repeat fairly often with different stocks.  For one, it definitely seems to make sense to buy large cap stocks during periods in which they've been historically strong.  We've yet to generate a summary where it made sense to buy if, say, a stock had a history of weak performance during a certain period.

We note that both Intel and Dupont stock have historically fared well when they trade in a certain range (somewhere between $90 and $115).  That is, if you buy Dupont at $100, it'll probably fare nicely, at least until it gets over $115.  We'd assume that the underlying logic is that folks are eyeballing the possibility of a stock split, which many view as a positive development.

Now, most would consider Dupont to be a fairly dowdy stock...not suitable for day trading.  Looking at the tables, though, you could have averaged around 1.1% gains per day simply by buying it if it had a particularly lousy session 3 days ago.  At the risk of boring you, we have about 4000 lines of data.  If you sort the data according to losses three days ago, and then look at the gains that followed, here's the top 100 results...