Evaluating the Tabulations
June 24, 2009 by admin · Leave a Comment
Although gains were recorded in most months during both the favorable unfavorable six-month periods, there has been a considerable difference in magnitude of the average gain achieved during favorable seasonal periods unfavorable periods. (Stocks advance approximately 75% of the time but, apparel there are advances and, then again, there are advances.)
Returns during unfavorable six-month periods have averaged just a bit than 1% per period, with the rate of return while invested approximately 2% annum, less than risk-free interest rates in most years. As a rule, investors which have been better off in the stock market for just six months each year and six months than being fully invested at all times (although this is not true for every year, of course).
The performance of this seasonal six-month period timing model has been essentially similar to the Nasdaq/NYSE Index Relative Strength Indicator and the 3- to 5-Year Monetary Indicator, which also produce virtually all net market gain within defined and limited holding periods. These “mood indicators” are not precise on their own in terms of market timing, however, so they are probably best employed as an influential backdrop to inveshnent decisions based upon more specific timing tools or as a consideration for decisions regarding the extent to which you want to be invested at any time.
There certainly do appear to be significant differences in performance between the favorable and unfavorable six-month periods.
Measures of Market Breadth
May 31, 2009 by admin · Leave a Comment
One useful measure of market breadth lies with the advance-declme lie, a cumulative total of advancing minus declining issues on each of the various exchanges. You can start these cumulative lines from any level, using daily readings for daily-based advance-decline line readings, or weekly readings for weekly advance-decline line measurements.
For example, if you started an advance-decline line of the New York Stock Exchange at an arbitrary level of 10,000, and on the first day there were 1500 issues advancing in price on that exchange and 1,000 declig (unchanged issues are not
included), there would be 500 more issues advancing than declig that day The advance-decline (A-D) line would advance by +500 units, from 10,000 to 10,500. If there are 200 more declines than advances on the subsequent day, the A-D line would decline from 10,500 to 10,300.
We will return to applications of the advance-decline lines of various market indices, but first we take a more detailed look at the relationships of the number of issues rising to new highs and falling to new lows. This is another area that reflects the internal breadth and strength of the stock market.