Historic Drawdowns in market

The last two weeks steep downhill and loss of 10+ percent on S&P

RED DOTS – inter year DRAWDOWNS

The chart below shows calendar year S&P 500 returns without dividends (grey vertical bars).  Below the bars are red numbers which indicate the maximum intra-year drawdowns.  The chart makes clear that 10% drawdowns are fairly common.  What is not common is a drawdown of only 3% which was the case in 2017.

Another important observation from the above chart is that as long as the economy is not in a recession (areas shown with horizontal green bars), the calendar year returns are usually positive.  The U.S. is not currently in a recession.

From January 1950 through December 2017, the S&P 500 has declined by 5-10% 41 times.  The average length of the decline was one month.  The average recovery from the low was one month.  In the 11 cases that the S&P 500 declined by 10-20%, the sell-off lasted and average of 4 months and recovery took and average of 3 months.

Source : delta maker sentiment

Volatility and high frequency algorithms

Screen Shot 2018-02-07 at 3.14.26 PM

If it wasn’t obvious to investors,  fanned the market volatility. Treasury Secretary Steven Mnuchin said that algorithmic trading played a role in the sell-off as he sought to reassure jittery investors.

The S&P 500 fell as much as 9.7% from its peak. That’s practically the definition of a market correction, which is commonly understood to be a decline of at least 10%. The small-cap Russell 2000 did sink more than 10%. (IBD)

No, i am not talking about terminator 2 judgement day

yahoo has a small segment here

As posted in the previous post on this site we have had and we had exited the market on Jan 30th when we

5 days of stalling and no progress

2 days of high volume selling

100 points loss in 2 days in high volume

Top leaders down in high volume

( first photo source : trading view )

FFTY etf a proxy for top 50 beat stocks in the market down by 2%

On Jan 30th – the market gapped down 88 points …

Market could be in Correction ?

5 days of stalling and no progress

2 days of high volume selling

100 points loss in 2 days in high volume

Top leaders down in high volume

( first photo source : trading view )

FFTY etf a proxy for top 50 beat stocks in the market down by 2%

#ffty #etf

#market

#marketincorrection

Looking into todays Market Fall

It could have been a potentially good money making day. I should not have gotten out so early. Shorted at 9:40 am with 1 contract of NQZ14 and left way too early.

I was not prepared at all, and I only saw the signs later, much later.

What was the signs? Simple as before- Price and Volume.

Overall 30 days

4087 was a 1 month old support and resistance from above

Now, lets look at the 1 day 2 min chart, a 4500 volume contract! Just right at the open there were a rush of sellers.

By 9:48 am I should have seen this spike in volume, the tallest bar in the left .

afterwards there was not turning back. at 9:38am, 9:40 am, 9:42 am, and 9:44 am all great volume spikes and price decreasing.

NQ 1DAY 1 MIN

Hope fully next time we will not miss it

Happy Trading!

 

Market still in correction

accumulation distribution (money flowing in and out of the market) gets a grade of C to D. Which means that there is a net flow of money out of the market. (A, A+ is the best time to keep the money in the market).

Delta Market Sentiment Indicator is below 50.

So, the bottom line is this : Stay in the sidelines, till the big money (Mutual funds, Institutional investors) get back in.

Happy waiting!

PS: Source of the above article is Delta Investment Management newsletter and Investors Business daily.

Reasons or Factors or correlation or causation or whatever???

So again we find the talking heads coming in droves. Reminds me of the song from talking head (the band, not the pundits of wall street).

Henry Blodget is giving us

Three basic reasons:

  •         Stocks are still very expensive
  •         Corporate profit margins are at record highs
  •         The Fed is now tightening

Now yours truly traveltrading will give you one singular reason

1) Japan economic index dropped 2.5 percent which effects its exporting capacity and the chief harm is done to Germany which is one of the biggest trading partners and hence we find EU indexes and Asian indexes following the US indices and hence we can see further correction.

I just made it up.

Who cares what the reasons are for our style of trading. We have only one thing to look at, and that is price. If the price is going up we buy, if it going down we sell (trend following, counter intuitive).

Happy trading

 

Entered into new position this morning

Good Morning.

As i said in last post, market is in correction. I have entered into 1 new position – ultra short of QQQ.

The ticker is QID. It is not a short position, but long (bought) position.

It is double the reverse of nasdaq.

Reason for entering : It just crossed above the 75 day SMA, and market is in correction