Wednesday, February 03, 2010

Rotation Variations

Some impressive strength and breadth in the markets over the past 2 days, although my Project Z indicator has now penetrated into overbought territory on virtually all the major indices.
Just for comparison sake I ran the 6 period moving linear regression sort on both 1 and 2 day bars. Of note is the concurrent low rankings of VXX, SH, TLT and the Qs.
Perhaps surprisingly, the SPY is ranked #1 on the daily sort with the DIA close behind. A more typical scenario is momentum leadership held by the higher beta indices. The sort results reflect SPY performance Tuesday: up 1.3%, with the IWM & DIA up 1% and the Qs up .7%.
As an aside, I personally avoid trading the DIA as it's composed of only 30 stocks, many of which are heavily gamed on a daily basis by large prop shops and the open and close in DIA components can be interesting, to say the least. In addition, a quick look at volume distribution among the DIA components will show that the hands down leaders every day are often INTC and MSFT, a fact that tends to skew DIA performance in line with the SMH. That's not necessarily a trading handicap, but it does help to be aware of the alignment.

Some major changes to the blog format and content are in the works that I hope will both enhance the functional utility of the site for my readers and at the same time allow me more time to focus on actual trading. Fellow bloggers appreciate the amount of research and preparation that goes into these posts. Unfortunately I've come to the realization that such a time commitment is compromising the amount of attention that I can devote to trading, which is what keeps the lights on and Mrs Barnes happy. The result will be a more streamlined and consistent blog content that will more closely reflect actual trading decisions that I'm implementing.
The new format should be operational by the end of the month.


gohara said...

Hi Bob,

When you run your 6 period linear gegressions, are they displaced 5 or 6 bars? It appears they don't reflect the most recent bars. Or is that a function of the moving average of the linear regression?

bzbtrader said...

There is no displacement. Telechart settings are Period=6, Extension=1 and Width=3. The indicator looks the same as the 6 period TradeStation Linear Regression indicator. . in contrast to the Linear Regression Line which, as the name suggests . . is a line and which does have displacement parameters.

gohara said...

Thanks, Bob.
I'll try to reproduce using Stockfinder.