Where did you get those numbers from? I actually ran this test myself in eSignal and got slightly different values. I said that (high - low) / close = the daily range %. I just added all of those up and then divided by the number of days. Here is what I got.. eSignal daily $spx bars go back to 1985, but Ill start at 1990. 1990: 1.31% 1991: 1.11% 1992: 0.81% 1993: 0.70% 1994: 0.81% 1995: 0.72% 1996: 1.02% 1997: 1.42% 1998: 1.58% 1999: 1.55% 2000: 1.84% 2001: 1.73% 2002: 2.02% 2003: 1.37% 2004 so far: 0.93%
Look, as long as rates are as low as they and bond prices are in the sky, all the money is going into equities vs fixed income. It's very simple. Trust me there is not enough money in the treasury to hold this beast up if she starts to tip. The hedge funds alone could sink this market with one mouse click. If you look over the last 150 years in history, we have never ever had a major market meltdown with yields this low, it just doesn't happen. If yields start to rise later in the year, you will start to see money flowing back into bonds. Let's put these conspiracy theories to rest. And if you want to know why there is no intra day volatility, look at how many bucket shop daytrading firms have gone under the last two years. Worldco alone made up 2% of the daily volume of the NYSE. Those numbers are huge when you think about it. Now add up all the other firms and you will see that all the dumb money that use to create these intra day extremes is gone. We now have a very efficient market. Now throw in all the black box trading and automated stuff that is going on and add in all the arbitrage with the emergence of the over 30 new ETFS that have been launched the last 2 years and you will realize that this market is very very tight.
The volatility explosion during the tech bubble and it's aftermath was the anomaly. Equities are merely trading back near historical volatility. The notion of trading in 3% index ranges day in and day out is truly once in a lifetime type stuff. Stocks are back into their normal shitty 90% of the time mode. If your strat is dependent on momentum I suggest looking at other global products. Also as far as this talk about deficits and the dollar. The Treasury market is the ultimate arbiter concerning debt issuance. Lenders are SUCKING UP debt at these yields. Forget what you THINK about deficit spending. The bond tape is saying something different. And the dollar, well....look at a recent chart of the $ and compare it to stocks. The correlation is clear. This equity rally is being FUELED by the more competitive dollar. If I was long stocks, dollar STRENGTH would be my worry!
pabst if you are right, then this is really a difficult situation for people like myself. testing strategies on single stocks is not an easy task over a long period of time, since you have to take many baises into account. index membership bias, survivorship bias - all these things and others. the longer you go back, the bigger the problem to create an unbiased database. this is why our testing in market neutral strategies usually starts mid nineties. pretty much capturing the high vola period. you see the problem. i for myself think that it is very difficult to find systematic approaches that do well in low and high vola periods. one of the key things that your ratio between portfolio turnover and volatility should be rather constant, meaning that in low vola times one should reduce frequency. someone earlier on said he worries about the absolute point range. my thinking is different, since i do think that the market thinks more in percentag terms than in absolute points. i correlated the daily range in absolute points of the sp future against the index as such. and i did it again with the daily range in % terms against the idnex as such. absoulte points correlate by 0.79 with the future and percentage points correlate by 0.3. this indicates that current range in points depends much more on the current level of the future. well just my point oif view. points mean nothing. percentage and basis points are the key. anyways peace
Using the 3% range movement as an example, you need to switch gears when you see it within X number of days. Have a method for trading high volatility, and a method for low volatility, then maybe one for medium. Maybe use a 20 day trailing range percentage... That's overly simplistic, but it works once you flush out your backtesting. You have a choice - to trade what you have or to hope for a change.
I got my numbers by importing the daily non-adjusted SP contracts from CSI into Excel. I used the same formula as you did. Here's another thing I found: Number of days with 3%+ range 1998 - 25 1999 - 6 2000 - 27 2001 - 25 2002 - 56 2003 - 9 2004 - 0 I have 4/16/2003 as the last 3%+ range day.
There are many things you should cross off your list for consideration. As a starter cross off anything that is related to how things work. We all have limitations. Yours are sort of pervasive as determined by printing, annotating, and keeping a file of all your posts up to those by mid 2003. The EOP just buried the economic viability of the US. Why and how is not something you should consider thinking about. Watch "West Wing" and let it go at that.
moneymoneymoney and Adonos, Thanks for the numbers. It really gave me a good perspective. We could be in for years like 94-97. I really hope not though. I guess i should start working on learning how to trade low range days. Back to the drawing board. thanks again.
You always have a much more focused perspective. Could you please go in more depth of the EOP(Executive office of the President) and how long it might take to get the economic viability back. Although it may be selfish, i am more curious as to the relationship of volitility and economic viability. I think that if the big money understands that the economic viability is bad, then we might get a correction. This would lead to good volatility instead of this trickle up. thanks and i am glad to hear your health is getting better.
The simplest over all example that immediately offers a picture is how the body handles shock as it percieves danger or stress. the blood retreats to the inards and slows stuff down as an act of preservation. Also imagine the stages of shock and the fact that it can get to an irretreavable situation. The EOP has two primary functions when push comes to shove. The mission and the surprises. During quality times it is possible to bring to bear an incredible array of resources to deal. At other times damage control prevails. Nixon set up OMB. There is also the JEC on the hill. This is what "runs" the money federally. It is in an econometric context. Four elements define econometrics: direct, indirect, induced and substitution. The mission drives this along side "standing obligations". Surprises require fixing. Strangely all of this is colored in just one way. By the leader. Since I am apolitical and independant financially and have not had to work during my life, I am classified as "free" in the system. It made it possible for me as a person who was assigned "quick studies", to cogently and succinctly write, on zero time frames, stuff to S&B a response for an immediate need. I absolutely had a 100% guarantee that I would be pissing off people. This was important as a means of getting all issues surrounding a need on the table, addressed, brokered, resolved, planned for and then manifested. From this set of pictures you can see a continuing very high pressure process. All Presidents before Bush have been inclined to "problem solve". The construct was to have a person act as "honest broker" continually in the realm of the "need". An honest broker is a person with incredible expertise in the field of the need and he is a person whose track record has taken him to the top of the class of experts in that realm. EOP, for economics, does not have an "honest broker". Second, because of this there is no problem solving model at play. There was an effort at one point, however simply because the EOP was mostly staffed with carryover expertise from prior admins. This group worked to get the situation in hand thinking they had "rights" but they were trumped by two groups. Cheney et al and law makers. Neither of these controlling factions had any motivation to do the right thing. Both have other primary motivations and obligations. Now to answer your Q. I will give you one liners each facet. The leader. He will "not argue with himself. What he has said is the way it is going to be. (This was unknown to most people from cabinet level on down at the beginning.) NEC man. He is a reject in the community of expertise in which he has spent his life. He was put there because he can be controlled in the known idealogical context in which he made his mark. Greenspan regards him as a nitwit. So there is no "honest broker". Brandeis reports. These traditional bound 10 pagers (The cogent result of full blown honest broker efforts in each and every sector of EOP) usually given to the Pres and associated staff are not done in this admin any more. A group of economic people tried to do it and got smashed. Brandeis resolutions. In the past they were debated and the Pres decided. to days replacement. An agenda is set, the participants are "faxed" scripts and they are signalled in the meetings to say their pieces. After this not decision is made by the Pres. He acknowledges the input and says to the troops to proceed as indicated. How long to fix it? This is a housecleaning chore. Replace Lindsay. Reestablish Brandeis with current top guns and get the agenda makers and script writers axed (five or six people). Replace the EOP management staff since they were just axed. Half of the top guns have never done a Brandeis or been on staffs that have. Getting replacements is not going to happen. There is no one in their right mind that will take the jobs. So it will take about 11 to 12 months to put the fix in. There are some really heavy weights on the detail now. Soros is an example. I am 71 and just read the papers and stay in touch. It happened, though, that I worked with a portion of the present crew when they were comming up the line in prior admins or knew them or of them in the private power structure. WIN was a thing I axed (Ford) as an example that will give you a deeply humous context.