Joined Nov 11, 2007
1,458 Blog Posts

High Tight Flags for Tuesday

The recent grinding over the past couple of weeks has put a damper on formation of new high tight flags. There are still some hot ones waiting to make their next moves.

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Decliners Indicator Suggesting Immediate $SPY Bounce

Here we are again. Does $SPY bounce and continue to consolidate around the 50 day average or does it slice through the 50 day and begin a real correction?

Two of my breadth indicators are signaling that we will bounce, and soon. Let’s take a look.

We are focused on the red and green indicators in the bottom panes. The green line is the decliners indicator which ranks the current number of decliners against previous numbers. Anything above 80 is usually good for an immediate bounce. It closed at 90+.

The red line is the number of stocks above their 5 day moving averages. I like for this number to get beneath 700 in order to indicate the possibility of a bounce sustaining itself for several days. It closed at 891.

I’m looking for a quick bounce. I still think it will not be sustained for long and $SPY will end up right back where it started.


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Batting .800

I know some of you are baseball fans. You might enjoy this video montage of my son getting 4 hits in 5 at bats today. He hit every time but was thrown out at first in one at bat.

I was hoping his performance might bring good mojo for my St. Louis Cardinals in tonight’s game 6 against the Giants. Unfortunately, I believe that his success may be negatively correlated with the Cardinal’s performance as they are already down 5 – 0 in the 2nd inning.

I’ll have a post up about market breadth later this evening.

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Ye Olde Cup With Handle Screen

Well, as I predicted, we did not experience a real correction. I did predict a bounce, but did not guess it would be sustained the way it has been. Perhaps $SPY will weaken here and head back towards the 50 day average.

The High Tight Flag screen has not been producing anything new over the past couple of days, but $INSM and $IMH still look good.

The screen that has returned some interesting plays is the Cup with Handle Screen.

Have a great Friday!


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New Paper: Does Academic Research Destroy Stock Return Predictability?

R. David McLean
University of Alberta – Department of Finance and Management Science

Jeffrey Pontiff
Boston College – Department of Finance

October 3, 2012

We study the out-of-sample and post-publication return-predictability of 82 characteristics that are identified in the academic literature. The average out-of-sample decay due to statistical bias is about 10%, but not statistically different from zero. The average post-publication decay, which we attribute to both statistical bias and price pressure from aware investors, is about 35%, and statistically different from both 0% and 100%. Consistent with informed trading, after publication, stocks in anomaly portfolios experience higher volume, variance, and short interest, and higher correlations with portfolios that are based on published anomalies. Consistent with costly (limited) arbitrage, the post-publication return decline is greater for anomaly portfolios that consist of stocks that are large, liquid, have high dividend yields, and have low idiosyncratic risk.

Download the paper here.

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High Tight Flags for Monday

There are 4 High Tight Flags for Monday. Followers of these HTF posts will notice an old favorite, one that the system has done very well with.

Have a great week trading!

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