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Was "Red Thursday" really that scary?



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Hi all,

Wednesday night I decided to go long (short-term) with SYKE at the opening. 
But news in Thursday's morning (HK stock market's fall, negative opening in U.S. 
markets) convinced (here the verb is used as a synonym to "chicken out" <g>) me
to stay out all the day long. Out of idle curiosity, after the closing I 
checked out how SYKE did that day. What a surprise! After initial drop at 
the opening from Wednesday close at 26.375 to 25.75, it wandered around 25.5 
a half day, then shot up to 26.875 at closing. It made me wondering how many 
stocks handled the crisis as nicely AFTER opening.

The exploration with the filters C - O > or < 0 applied to my basic set of 
1010 stocks (description see below) suprprised me even more - the calculated this
way Advancing/Declining Issues Ratio was 1.2 for this "Red Thursday"!!! 
I would think then that having accepted the initial loss at the opening 
the markets were not gloomy at all humming along after it as on an average
day. Indeed, standard "Close-to-Close" Advancing/Declining Ratio averaged 
by MA TRI 250 days (as of 10/23/97) gives for the exchanges:
NYSE   = 1.3
NASDAQ = 1.0

On other hand, for this day (10/23/97) with

              Advances    Declines   
NYSE               560        2404     
AMEX               134         445     
NASDAQ            1008        3466     

"Close-to-Close" Advancing/Declining Ratio was: 
NYSE   = 0.23,
AMEX   = 0.30,
NASDAQ = 0.29,
and for my set if to explore with the similar filters C -Ref(C,-1) > or < 0, it was
even more different from "Open-to-Close" case's value above: 0.14.

(You may ask why the last number is much less than those for the exchanges. My guess 
it's perhaps because there are fewer small caps in my stocks' universe  and 
hence more international exposure; also, by the choice they are more volatile
than on average.)

Anyway, are those numbers for the ratio (0.23; 0.30; 0.29) on Thursday in fact 
misleading to assess a sentiment of the U.S. markets handling HK crisis that day? 
After all, this is what all of us are concerned with now - how strong the markets are 
to endure a bad weather.

As for Friday, it was just the opposite: an expectation at the opening for markets 
to rebound  didn't last long. After a short rally they started to loose ground steadyly. 
However, if you look at the day's regular ("Close-to-Close") statistics it looks much 
better than on Thursday. Indeed, for Adv. Dec. issues it was

               Advances    Declines  
NYSE              1329        1498    
AMEX               265         302    
NASDAQ            1932        2331    

giving for Advancing/Declining Ratio 0.89; 0.88; 0.83. Pretty decent, huh?
As for my set of stocks, the ratio also seems encouraging if compared to Thurdsay's
 -  0.52 . 

But "Open-to-Close" Advancing/Declining Ratio calculated for my stock set was 
disastrous - 0.22 versus Thursday's 1.2 . I.e. after the opening the markets' 
performance was just lousy and MUCH WORSE THAN ON THURSDAY! 

Mind I took only a single breadth indicator, and cannot say about others. So 
it may be too soon to panic (short-term) <g>.

I guess what's all this about is that the public builds up its expectations during
non-trading hours as well, but a reality check (for expectations and, which is more 
important, markets' strength) comes only when markets are open, and when expectations 
are a significant factor, Close vs. Open comes into play at variance with Close vs. Ref(Close,-1).
So, watch out if this is a case. Some good ol' indicators may be misleading. 

Well ... to watch out when it's bad is a pretty cheap advice, isn't it?


			Cheers, Vitaly


My basic set: 
Of NYSE, NASDAQ, AMEX ~10,000 stocks were chosen (as of 09/09/97) those with:
Minimal Close for last 30 days >=    $7
MarketCap >= $250 mln.
Average Volume for last 30 days >=  100,000 shares,
making thus 1706 stocks. 
Then leaving only stocks with 1-day Typical Close Change > 1.5%  if averaged over
last 60 days (MA 60days TRI applied to Abs(C-Ref(C,-1)) - a volatility requirement 
- made a final cut to 1010 stocks for which the above calculations were done.