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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank
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To: Jenna who wrote (15645)9/26/1998 12:09:00 PM
From: Patrick Slevin  Read Replies (1) of 120523
 
Hi Jenna

I was attracted by your opening comment,

<SELL into weakness and BUY at strength.. Ridiculous, right?>

I hate to be sketchy about it, but I have no precise knowledge of how she did her analysis. However a Futures trader I know ran a study of intraday trading for the past 10 years and came up with the conclusion that as the futures trade up (or down) in extreme fashion they tend to get even more extended in the same direction. That is to say, if the futures are up 6 or 7 points the odds favor 10 to 11 and so on. Sort of saying a "Body in motion tends to stay in motion", I suppose.

This is not to say, as you point out, that a gap down or up in the futures should be traded in the same direction, just that as the day progresses the "odds" are that a trend in one direction or another will tend to continue in such a direction, barring outside agencies, such as a speech by Greenspan or whoever.

I'm sorry I cannot get overly specific about her work. I do plan on seeing her in the late Fall sometime and hope to get a more detailed run-through on it. I imagine one can point out Momentum trading or any of several other things that would make it appear that such a study is useless; but I for one have always been a bit reluctant to "sell into the hole" or buy a Futures market that is up 18, say. However, mathematically it appears it's really not such a bad idea from what I understand.

Just a thought.
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