Paris is Good, Goldman is Bad, Bad, Bad! Welcome to Bizarro World

Now that the background for “what happened” has been set, let’s move to the important things. What should we do and how can we potentially prosper from this?

For Better Market Timing, Rely on Systems, Not Emotions

The S&P 500 hit an all-time high Thursday, and year-to-date the index is up 10.2%. The bull market just keeps on rolling despite negative sentiment about subprime lending, the housing slowdown, the plunging dollar, high oil prices, and weak retail sales data on Friday.

Buy Market Weakness, Not Market Strength

Whenever the market rises or falls sharply for a few days, there’s never a shortage of reporters and analysts eager to offer their “expert” opinions and forecasts. We looked at consecutive up and down days in a row for the S&P 500 from 1/1/89 to 6/30/06. Here are some statistics to guide you...

VIX Extremes

The VIX is obviously very stretched as I post this. And historically, extreme VIX stretches have many times (not always…many times) preceded market turns to the upside.

How to Systematically Trade a Fear-Driven Market

Raptor II has been one of our best-selling trading systems. One good reason for this is that it has achieved the highest gains per winning trade of any strategy we have published to date. Raptor II identifies deeply oversold, usually event driven, mis-pricings in individual stocks. It does this by waiting for stocks to drop substantially, then triggering an entry signal once the sellers have been washed out, and the professionals move in.

Bad Company? Buy Their Stock

From 1983-2006, Fortune’s annual list of “Most Admired Companies” has under performed their list of “Least Admired Companies”. The most admired companies returned 15.4%; the least admired returned 17.8%, 6.6% above the S&P 500.

Opinions Are Fine, But Statistics Are Better

The main theme behind my research and our trading is "reversion to the mean". To us this is the holy grail of trading. This is not only our opinion; it's backed statistically with literally thousands of tests we've run over the years.

The Improved R2 Strategy: 84% Correct with Just 6 Rules

In early 2005, we published the R2 Strategy on TradingMarkets which quickly became one of our more popular strategies. The strategy was also presented at "The Traders Expo" in Fort Lauderdale last year. In the "MoneyShow.com Best Webcasts of 2006" it was voted the number one presentation in the "Best for Traders" category. We recently updated and improved our research, leading to this article that shares our latest findings with you.

New Research on PowerRatings Entries and Exits

When we first published PowerRatings beginning in 2005, the simulated results were based upon a holding period of five days. If a stock had a PowerRating of 9, its simulated returns were based upon buying a stock on the opening and exiting the stock five trading days later. But, as we will teach you here, one can dramatically improve the simulated edges in PowerRatings further by adding two simple trading rules to them.

Why Every Trader Needs to Watch the 200-Day Moving Average

Moving averages (MA's) are among the most popular tools available to portfolio managers, analysts, investors and traders but are they being used in the most effective way?

If a Stock Drops 5 Days in a Row, Should You Buy It?

We find statistical evidence that shows short-term strength is usually followed by short-term weakness and short-term weakness is usually followed by short-term strength.

Why Strong Stocks are Often the Worst Buy Candidates

If a stock gains 5% or more in one week, would you view this action as bullish? What if General Electric (GE) rose 5% next week? That would equate to an estimated $19 Bln. rise in GE's market cap (at current prices). The media would generally consider such a rise in the valuation of GE as positive. No doubt CNBC, the Wall Street Journal, Investors Business Daily, and others, would all be featuring the stock prominently. Most likely, the price rise would also be accompanied by bullish news.

4 Rules to Time the Market Using the TRIN

The TRIN is a very popular indicator published in the Wall Street Journal, Investors Business Daily, Barron's, and by a number of websites. Considering just how popular it is, we find it surprising that there are very few statistical studies to show whether it actually works or not, and how to use the TRIN effectively.

Why RSI May Be One of the Best Short-Term Indicators

We consider the Relative Strength Index (RSI) to be one of the best indicators available. There are a number of books and articles written about RSI, how to use it, and the value it provides in predicting the short-term direction of stock prices. Unfortunately, few, if any, of these claims are backed up by statistical studies. This is very surprising considering how popular RSI is as an indicator and how many traders rely upon it.

If a Stock Keeps Moving Higher, Should You Buy It or Sell It?

In chapter 3 of "How Market Really Work" Larry Connors asked, "Is it better to be a buyer after the market has been strong and had made multiple days of higher highs? And, is it better to be a seller after the market has shown signs of weakness and has made multiple days of lower lows?" The answer to both questions turned out to be a resounding "No". This answer was based on quantitative research conducted over a 15-year period (1989-2003), and the results went against what was generally accepted at the time. We recently updated the research through June 2006, not just looking at the indices, but also individual stocks.

Can Buying a Stock That Gaps Lower Give You An Edge?

How many of you have turned on your favorite financial news show to hear a list of stocks that are set to open higher due to "bullish news". You're told stock XYZ is due to open 10% higher than it closed the previous day and shown a crowd that has gathered around the post where XYZ's market makers are eagerly awaiting the market open. If you own the stock, you're probably thinking this is great news, and if not, you're probably thinking about buying it. But then you think about the last time this happened and recall how the stock actually closed lower that very day. So what happened? Surely all the bullish news means XYZ is going higher...or does it?

When Do Money Managers Like to Buy Stocks? Here's the Answer...

Do money managers pile into the stocks at the end of the month in anticipation of 401k and savings money coming in? Well it looks like they do...big time! In 1999, Kevin Haggerty wrote about this phenomenon on the TradingMarkets site. Kevin had just retired as the head of trading for Fidelity Capital Markets, and he discussed the "end-of-the month" phenomena. Up until that time, I had not heard about it nor had seen anyone else write about this.