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?