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Dr. Brett is always writing interesting stuff – this caught my eye today – Demand and Supply: Measures of Stock Market Momentum. In the article, he outlines a method for measuring market momentum by counting the number of stocks breaking over a Bollingerband and below it:
Significant momentum is defined by a stock’s closing above or below its Bollinger Band; i.e., above or below the volatility envelope surrounding its short-term moving average. The larger the number, the greater the number of NYSE, NASDAQ, and ASE stocks that are trading with significant momentum.
Well that’s right up my alley. So I used the S&P 500 for my tests. And to make it more interesting, I compared it against another momentum indicator I look at – the number of stocks making RSI2 > 90 or RSI2 < 10. First, it’s interesting that the two are close. But what is also interesting is that there may be more subtly in the BB approach – for instance, during the most recent sell-off, notice how the line starts to fall off as the index trends down – perhaps indicating that the trend is weakening.
Here’s a graphic:
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D,
Tracking ur rsi(2) S&P500 in rt vs QQQQ. Shows some promise. Too many trades though. Have more work to do as in when to pull the trigger.
Like ur blog.
All the best,
n
Appreciate the comment NT – not sure what you mean by tracking RSI2 S&P500 vs. QQQQ – can you clarify?
btw,
I see u are moderating. Good.
here is my code at the moment:
_SECTION_BEGIN(“P_RSICount”);
Sell = RSI(2) 90;
AddToComposite( Buy, “~RSIBuySnP500″, “V” );
AddToComposite( Sell, “~RSISellSnP500″, “V” );
Plot(Foreign( “~RSIBuySnP500″, “V” ),”RSIBuySnP500″,colorGreen,styleLine);
Plot(Foreign( “~RSISellSnP500″, “V” ),”RSISellSnP500″,colorRed,styleLine);
_SECTION_END();
I have a watchlist of SnP500 in a watchlist(hard to get a accurate list! SnP site has several symbols wrong but I have 497 symbols. Should be close).
n
Damn! that was fast!
I scan using above code, Run every one minute. I tried 100 high beta stocks on the NYSE first. Looking for a early signal for a buy. That didn’t work as well as I thought. Many of the symbols were under one dollar.
n
I haven’t tried running it intraday – but I expect it would act similar to TICK. What’s your data source for intraday? My issue is I use InteractiveBrokers and there is a 100 symbol limit – so I can’t see how I can really do it intraday without a different data feed.
IQ.
Like I said earlier, too many trades. So I need to pick my spots.
My thinking is determine a trend, wait for a pause, then buy. So I need to determine a trend. Any thoughts? ADX?
Being that the snp is market capitalized maybe one doesn’t “need” 500 symbols. Maybe 100 of the largest in the indice will do. Today I will take a look at the caps on the index
Very solid article. I saw a webpage with a article almost identical to this one a couple of days ago. This article is a week older so I think they have just copied and eddited it. I am not accusing you of plagiarism it’s merely just it is out there. I can not remember the url, sorry (age thing)