Saturday, September 10, 2011

9 to 1 Days Used to be Rare


A "9 to 1 day" refers to the up or down volume of all NYSE-listed stocks, expressed as a percentage of the total volume of all stocks that went up or down on the day. If total up volume equaled down volume, then the ratio would be 50%. This measure of breadth used be a be a serious indicator of positive or negative momentum. Major bull or bear moves could trigger off 9 to 1 days. They've been happening so much lately, so I'm not sure how significant they are anymore.

9 to 1 Up or Down Days:

Year
Up
Down
Total
2003
3
2
5
2004
2
1
3
2005
0
1
1
2006
4
1
5
2007
9
14
23
2008
9
26
35
2009
14
19
33
2010
20
19
39
2011
7
18
25


I believe 9 to 1 days are sign of correlation in the market. When stocks move, they move in big bunches. I'm not really sure what it means or why it's happening; it's just an observation I've made. My only explanation is high frequency trading and in the introduction of computer trading algorithms. These computers are all seeing the same patterns and making trades on them within mili-seconds. They pile into a crowded trade that just just feeds on itself. Lately, there have been many "30 to 1" days, which used to be unheard. Below is a graphic I got from Ritholtz's blog showing a timeline of HFT. The increase in "9 to 1 days" seems to correlate with advancements in computerized algorithmic and HF trading.






Anyone have any other ideas or thoughts?

6 comments:

lantama said...

Hello, I think it is like this because of everyone using passiv Indexproducts and Indexfutures especially in a volatile environment. It was somehow different years before.

Anonymous said...

Good question. I think HFT might have an impact, but I also think ETFs have a large impact. No data to back up my thoughts - just a hypothesis at this point. One other thought is that the market seems to be switching between risk on/risk off states due to all the political and economic uncertainty.

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RickJ said...

Chris,

I just came upon your blog and was wondering if there are any posts where you outline the specific details of your trading systems you have been using?

thanks

Rick

Chris said...

Rick,

I don't have specific rules published. But I mostly trade mean reversion systems. I try to look breath, VIX, RSI2 levels, moving averages, etc. to find an edge.

thelonelytraderv2 said...

This is a great chart!

I think HFTs may have an impact in the short term -- compounding the occasional cascading effect that everyone seems to be calling "flash crashes", usually as a result of some MM's software problems. Long term, however, I believe the "real money" still moves direction.

What traders call "noise" has increased, but I expect this would occur anyway with increasing volume -- even if HFTs and other algos were not present in the market. They simply represent to me "other participants" and I have to account for them in my own trading models. So far, this has meant being more selective with my trades. I also trade a RtM strategy, within the broader context of market trend.

Great blog. I am a statistics devotee, but relatively under-developed in terms of what I'm capable of modeling. I'm looking forward to learning more from you.

Cheers

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