Re: [amibroker] Re: Sector Analysis, AmiBroker Email List Archive

2008/7/8 brian_z111 <brian_z111@xxxxxxxxx>:

Jayson,

Thanks for your post.

I have an interest in the subject and don't mind to share a little.

My batteries are a bit flat from a heavy weekend so it won't be my
best effort.

Lightly referencing posts in this thread.

Sectors:

a) it is worth clarifying definitions e.g S&P versus ICB (the Boston
tea party is still ongoing so London/NewYork have to do it
differently) plus there are other players in the sector game
b) then there are sub-sectors, industries etc
c) the business activities, of the constituents of a sector, and
their membership of a sector, don't necessarily equate.
d) you can trade the sectors, themselves, as a sector ETF/option or
other instrument - this possibility tends to fade away outside of
US/Euro (perhaps not for those with local knowledge - it just happens
that I am one of those poor people who is limited to speaking
english).

Some random links (no idea if they are good/useful but I threw them
in anyway) - there are plenty more to be googled:

http://www.market-topology.com/
http://www.sectorspdr.com/correlation/

How can we find top sector/industry/stock in AB?

Technically these things are very easy to do.
More important is selecting a good strategy in the first place.

IMO the thing to look out for is that 'best' depends on your
definition of 'best' AND also depends on the timeframe (as I told
Dingo - momentum, direction and time are all interelated) - the top
daily sector might not be the top weekly sector (I chose my
timeframes for other reasons e.g. statistical smoothing == high
frequency trading) - highest high of x days or Relative Performance
measures,as mentioned by Jayson are certainly worthwhile thinking
about (I am not limited to that though).

How do we use it - what are the typcal W/L ratios - how much can we
win etc?

Per my previous comments:

- the long term market is the rational market (based on company
valuations) e.g. a stock/sector with stable and growing
earnings/dividends can not keep going down forever - or vice versa
(however they can go down an awful long way 'with the tide' so don't
pre-empt/go against what the charts are telling us).

Note: we saw, in the dot com bubble, the most extreme example ever(?)
of how pure speculation pushed IT stock prices to unheard of
valuationsNOT before bursting.

- the short term market is the irrational market - it is almost a
random walk (if we backtest we find so many of our seemingly good
ideas return to near random behaviour over time) - we have to be
competent with evaluation (stats) etc but stats can not 100% confirm
that we are not being 'fooled by randomness' - IMO many times that
traders think they had a good system that was then traded to failure
etc was really an instance of chance luck that faded away with time.

However - human nature is persistant and predictable (as per
Siddharthas post there are many examples of market inefficiencies,
based on the mechanics of the market, institutional behaviour, human
behaviour, that exist in the market today - not all are short term
e.g. if you follow a good stock all the way down and then wait for
the upturn signals then this long term play will 'beat the market'
for sure - give or take some other techiques thrown in and assuming
random acts of the stock market gods don't overturn the whole game)

If we can find an edge, based on the psychology of the market, then I
predict we will find a trade that:

- persists for a long time,
- makes unbelievable W/L ratios,stats, % returns etc (defies the odds)
- probably will survive a lot of small freelance traders playing the
same game

(thanks to all for a good thread and also the 'new user' thread that
I don't have time to contribute to but enjoyed reading - especially
Siddharthas posts - anything to do with HermanHesse?)

brian_z

--- In amibroker@xxxxxxxxxxxxxxx, "Jayson" <jcasavant@xxx> wrote:
>
> All;
>
> A great deal of my work revolves around sector analysis. I like to
select
> stocks whose sectors are strong or advancing. one way to gauge a
sectors
> strength is to measure its components closing price against
previous prices.
> I like to use 25 day new highs as my gauge. The enclosed scan ( !
sector
> analysis) creates a list of 13 composite symbols. One for each of
the 12
> sectors plus one of the entire universe under study. By default the
> composites will be stored in group to 253.
>
> To run the scan first choose a universe of stocks. your range
should equal
> one day. On a large universe your initial scan will take a few
minutes.
>
> to view the composites I use a market Strength indicator (CMF or
your
> favorite) as well as the custom indicator, Sector View. this
indicator
> produces a smooth oscillator in histogram form. readings above 0
indicate
> market strength, below zero indicate weakness. The number
indicates the %
> of stocks within a given sector that have reached new 25 day highs
or Lows.
> in my bottom pane I have a simple line plot and include volume for
the
> sector.
>
> The resulting tab should look something like this....
>
>
>
> I have collected this data with XL for over year and found to be
very
> useful. AB makes my life so much easier! there may very well
> be a more efficient way to calculate these composites, I'm open to
any
> suggestions or improvements. btw a simple exploration of group 253
will
> provide a snapshot of RS by each sector. Those falling above
~Universe are
> out performing, those below are under performing. I hope some of
you may
> find this useful.
>
> Regards,
>
>
>
> Jayson
>