Sunday, December 16, 2007

Market Volatility


The chart above shows the small ordinaries index on the Aussie market. The small ords is made up of around 300 stocks but excludes the top 100 stocks (ASX100). So all the big banks and giants like BHP & RIO are taken out of the picture. All the so called blue chips are stripped out of the picture - I usually don't hold too many blue chips in a portfolio.

The chart is weekly. The top chart shows weekly movements in the Index close price. The most volatile time on the chart occured this year, with a move of -8.46%, followed by a +7.3% reversal. This must have been very challenging for short term traders and certainly woke up some long term trend followers!

The bottom chart shows 52 week ROC (adjusted). The switch from below the 0% line to above it is clearly shown back in 2003. The white horizontal line on this chart goes back 52 weeks.

The red bars on the middle chart show when one of my systems turns off. The green lines show when the system is on - colour is very useful on charts!

Now to state the obvious. We are at a potential turning point. We appear to be drifting sideways with some wild swings in either direction.

I am not going to try and predict the future from this chart because that is not the way I trade, except to say that it is pretty obvious that the market is more volatile now than it has been.

This post was inspired by Andrew's Humble Money blog and his post on The Return of Volatility.

regards
stevo

System Performance - 2 views of the same picture

I am a bit slow this month!
The first chart shows monthly performance based on open equity, whilst the second chart shows quarterly performance of closed trades.

Both charts show 2 views of the same portfolio. The closed trades chart (although the yellow bars of the chart include any open trades in mid December) is similar to the charts that TradeSim generates. The chart only looks at closed trades. It ignores the daily gyrations of the portfolio and only looks at profits made when the stock was sold.

So the top chart shows how much was given back before profits were taken, whilst the bottom chart totals profits made on closed trades. It's hard to imagine that the charts show the same portfolio and that the data was taken from the same source.

I am really only concerned with the closed trades profits. Note that the bottom chart shows quarters whilst the top chart is in a monthly time frame. I prefer quarterly (or yearly) charts, since I am looking long term performance.

stevo