Gotta love ZERO RISK in the SP500 = $$$
- Thread starter makloda
- Start date
2% drop is more (in points) on 1400 than it would be on 700...could be something to chew on.
That's a good point.
It reflects:
1. improved exchange regulations that prevents manipulative moves.
2. much more sophisticated investors and traders; with computers and mathematical models to manage their portfolio. No need for knee-jerk reactions.
(would you consider 2-line MA a mathematical model?
)i.e. we can have a 9,000 day uptrend without a one-day >2% correction.
or,
we can have an up cycle followed by a down cycle without experiencing a one-day >2% move!
if you are OLD, you will remember the Limit-Down days.
this is the comment from http://usmarket.seekingalpha.com/article/25254
NO DooDahs wrote on Fri Jan 26th @ 3:50 pm
This is fairly typical BS, technically true, but meaningless and insight-less. Volatility on both downside AND UPSIDE is compressed! For crissake, it's been 144 days since we've had a 2% UP move, and I don't hear anybody sounding forlorn about THAT! Before the current streak of 144 days without a 2% UP move, we had a streak of 680 days without such a large UP move, 680 days being the THIRD LONGEST such streak since 1950!!!!! Where's the UPSIDE VOLATILITY???!!!
Back to your arbitrarily-chosen "2% down day" as the subject of streaks. Weâve had 14 such year-long-or-more streaks since 1950, implying that we should get such a streak about every four years. If you look, we are about ten years removed from the last such streak, which was 526 trading days and ended in March of 1996. Incidentally, we've had four such streaks lasting over 700 trading days (almost 3 years!!) since 1950, and the last such streak ended in 1986.
Knocking on wood? More like trying to scare the statistically unsophisticated! Using 2% as a significant benchmark is showing ignorance of the historic return distribution of the marketplace, which, by the way, is conditionally heteroskedastic.
should read this too:
http://www.billakanodoodahs.com/2006/11/streaks-distributions-black-swans-and-golden-swans/
NO DooDahs wrote on Fri Jan 26th @ 3:50 pm
This is fairly typical BS, technically true, but meaningless and insight-less. Volatility on both downside AND UPSIDE is compressed! For crissake, it's been 144 days since we've had a 2% UP move, and I don't hear anybody sounding forlorn about THAT! Before the current streak of 144 days without a 2% UP move, we had a streak of 680 days without such a large UP move, 680 days being the THIRD LONGEST such streak since 1950!!!!! Where's the UPSIDE VOLATILITY???!!!
Back to your arbitrarily-chosen "2% down day" as the subject of streaks. Weâve had 14 such year-long-or-more streaks since 1950, implying that we should get such a streak about every four years. If you look, we are about ten years removed from the last such streak, which was 526 trading days and ended in March of 1996. Incidentally, we've had four such streaks lasting over 700 trading days (almost 3 years!!) since 1950, and the last such streak ended in 1986.
Knocking on wood? More like trying to scare the statistically unsophisticated! Using 2% as a significant benchmark is showing ignorance of the historic return distribution of the marketplace, which, by the way, is conditionally heteroskedastic.
should read this too:
http://www.billakanodoodahs.com/2006/11/streaks-distributions-black-swans-and-golden-swans/
There are more players with a "short" book which buffers the downside as the market drops. Long/Short hedge funds are largely responsible vs. the past when everyone was only long and downdrafts had a larger cascading effect of triggering stops and more stops with no support from any short players to temporarily halt the decline. This is one of the reasons that volatility has come down consistent with the surge in long/short players. More 2-way flow and positioning equals a more stable market in my opinion.
No you are just another unprofessional trader the market will flush in time
I think when the drop comes it will be nasty because everyone who is holding good profits will want to protect those profits. The exit door is going to be pretty narrow. But after that drop, expect a significant rally to take out the short positions and puts bought to protect investments. just the way the market works! I have recently started going short more than I am going long and short trades seem to work better for me right now. Interest rates are creeping higher and earnings guidance is starting to disappoint. I think February is going to be tougher to go higher. Is the 2% drop coming in Feb? Hard to tell right now. I will comment on this further in my blog tomorrow http://lauristonletter.blogspot.com/