More Volatility | stockbee


More Volatility

Downside moves are always more volatile. Volatile behaviors is even more pronounced during turns. Clustered wide range days are very common during market turns. So we have yet another volatile day with 750 stocks down 4% plus. In addition there was a hint of panic in the market.

Panic and fear is very good for markets. Panicky markets can turn on a dime. Some years back I had documented , every single 10% plus correction in market for last 30 to 40 years. I still have those notes in my files somewhere in USA. If you study all the panicky disruptive moves in market during various crisis you will see such moves resolve to upside with great force. Most panicky moves are followed by ferocious rallies, those rallies retest their bottom but after many weeks or months. Protracted downturns are less volatile and have systematic distribution with slow methodical selling.

From a more trading dynamics term, in my opinion and observation , in times of panic stocks go down due to absence of bids. The absence of bids forces sellers to aggressively bring down offers. You will realize this if you try and close a long position in panicky market. Once the panic subsides normal bid-ask behavior returns and hence the ferocious rallies.

As I have said before any market turn will be a process. If you want to play safe, best option is to wait for 65 days ratio to turn. When that ratio is in green all breakout based strategies have very high probability of success. In spite of the down move today, the 1000 plus breakout day still holds and it is time to anticipate turn to upside rather than chase the move to downside. For all the emotions around this move, this is just a 10% correction so far after multi year up move. Ignore the news look at the Market Monitor numbers.

Worst thing you can do during market correction is to listen to perma bears . All bearish scenarios and bearish propaganda sounds very logical and intelligent during market corrections. But the biggest strategic error a speculator can make is to get caught in bearish web. If you do that you will miss on next big rally. You should be tactically bearish, strategically bullish.

100 years plus of history of market clearly demonstrates triumph of optimism over pessimism. In few months time all this Armageddon talk will be just a blip. Perma bears are fools and idiots who do not understand markets and the markets statistical tendencies or want to ignore it to create a cult. Fools and idiots seldom make money in the market.

Current market is ideal for day traders and nimble swing traders. Alternatively one can use such period for R&D. The best thing to do during such time is to take a vacation, sit in cash and enjoy the fun and games from sidelines. Timing your vacation during market corrections is always good strategy.


Antonio said...

Hi Pradeep,

If I want to scan the 4% up and volume break for a particular day in the past, can TC2007 do it?
And is the TC2007 Gold version enough to do the scanning that you are doing ?

marketmakerX said...

Dude love your posts. Keep it up.
I've already recommended your blog to few friends. Thanks!

James said...

Well said. However, it seems that the subprimes stuff has the potential to bring the price down much more. I think that there are many entities that still have not disclosed their problems like the French bank BNP. That means that there are a lot of potential bearish news still to be released anytime. The main problem I see is that these news will appear little by little over many months and this is not a good news given the effect they have on the market.

Jason said...

we aren't at 10% yet either.

Pradeep Bonde said...



marketmakerx, james, jason

There might be more panic and drop but panicky moves always end in climax selling followed by relief rallies which often don't retest those levels for many months or weeks.

Mike said...

Hi Pardeep,
If one is down 20-25% on some stocks, would you suggest just selling now as the market looks like it will still get much worse?
Or best to just hold now that down so much? keep second guessing myself here.


Pradeep Bonde said...

I would just sell and wait for opportune moment to recover losses.

David said...

Hi Antonio,

TC2005 is a great product but like all products has a few weaknesses. One of them is the ability to run a scan for a specific date or range of days in the past. I know for a fact that you can do so with Amibroker cause I do it all the time. It reads the TC2005 data directly or can get feeds from other sources.

aka RedEyes

Gnib said...

Hi David, can Amibroker pretty much do all the scans Pradeep presented on the blog with TC2007? Is it easy to translate the formulas? Are there online resources to compare the two products? Do you recommend standard or professional version? Thanks!

Pradeep Bonde said...

You can run a scan in Tc2000 for past dates or specified dates by using dates in scan formula.

Mkt swimmer said...
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