Contributor since: 2006
Company: GSRTrades
Great strategy post, but wouldn't it make more sense to find these fast growers before they start registering strong RS trends and hitting new highs? In any given market there's only so many stocks really putting up the strong numbers. They're not hard to find with proper scans, before they hit lists like this. IMHO.
While we agree that short interest is usually not a dominant influence to longer term trends, the mostly hedge funds that sell short hold weight when it comes to short-term action. Since your two-month old article was published, more than 600 million more shares were sold short, a significant position to consider under the prospects of those sellers feeling pressure to cover, and certainly not at the "very very low levels" you claim.
There are three types of money in the market: Institutional, Professional and Retail, with their importance in market direction following that order. Many HFT programs are designed to front run institutional money, which is where our analysis focuses most of its attention. On the other hand, it's the retail money feeding on mainstream news and bad data that keeps us fed.
No idea what you're talking about:
We've been buying growth stock breakouts for over a decade - it's an ever so humbling game, but we've been profitable (up +60% for the last couple years.) And aren't afraid to be wrong - hell, we expect it from time-to-time! When the pitch comes we swing or don't. Through time, it's the winners that keep us coming back.
Last week we were Cautious Buyers, seeing if the recent breakouts would stick. They haven't. With institutional grade selling Thursday, we reversed course and nibbled on some shorts, which are showing a little profit. That's our game. Feel free to check the record on Covestor.
Great job on HAL.
Three months of light inflows into mutual funds doesn't tell me their overall trading volume is insignificant. The stocks these computers trade in tend to be largest of large-caps, not the smaller growth stocks we specialize in.
Price action doesn't look a whole lot different now than it did over the past century. In a way, it would be good to see average investors shaken out of the market. We'll be shorting all the way if that happens. It wasn't until the 1980s that average people began to be investors. Until then it was only for the very wealthy, who to some, controlled and manipulated the market. Our analysis would have worked then. Like I say, we'll do this until we stop making money with it.
Program trading was about 50% of volume about a decade ago. Yes, mutual funds have had major outflows last month, that's when we went bearish after noticing several distribution days pile up. It's certainly healthy to remain skeptical that it was just a coincidence. But we'll use the analysis until we can prove it's faulty.
We're not daytraders, our style is more like the intermediate-term. Market has never been a rational place. We stay profitable by cutting our losses short and letting the winners run. We could be right only half the time and still make money with that discipline.
HFT may dominate volume, but that's nothing radically new. A decade ago we were calling it program trading. What we're trying to measure best is mutual fund and pension fund volume. I don't believe their weight is meaningless against HFT. Should the counting of accumulation days and distribution days start to fail, we'll quit it. But I certainly have no reason to do so at this time.
Per William O'Neil of Investors Business Daily, a Follow Through Day just needs one of the indexes up at least 1.7% on volume greater than the day before. It doesn't account for volume averages. Of course, the more volume the better. But the signal is still good. Dan
Per William O'Neil, founder of Investors Business Daily, yesterday was very much a Follow Through Day.
Agree, but we're trading what the market does, not the economy, and might expect what happens technically to reflect that.