TSR ANALYSIS=S&P monthly analysis of 76 years Dear Friends, Traders keep asking me time and again that what kind of markets are most conducive for traders. Recently I came across a very interesting set of Data worth a read.
CLICK ON LINKS BELOW FOR IMAGES AND TABLES :- http://4.bp.blogspot.com/_oENZ2MOw8B0/S8HdQKKo7wI/AAAAAAAAAUw/COlXlpPYhzA/s1600/S%26P+historical+analysis.JPG The above frequency distribution table summarizes the monthly total return of the S&P 500. from January 1926 to December 2002. Some important observations. • In Almost 75% period S&P gyrated between +6 and -6%. This are some of the best months for leveraged intraday traders with no huge intra month volatility. • In one out of 924 months S&P gave a positive return of 42-44%. Similarly in one out of 924 months S&P gave a negative return of 28-30%. • For an investor the best profit booking and investing period was one of the above two. • Bottomline: Whenever over a small period of time we see markets generating alpha over and above the expected returns we should try and lock some gains out from the markets. http://1.bp.blogspot.com/_oENZ2MOw8B0/S8HgAFuVovI/AAAAAAAAAU4/lCuIU2Ujt0U/s1600/annual.JPG ANNUAL DATA:- OBSERVATIONS • Just check that while 75% of relative frequency was in the +/-6% band in monthly data the annualized data is much more widely spread with few extreme outcomes.Point to note annual movements are adhoc in nature. • A fantastic observation from this data set (S&P HISTORICAL BULL MARKET) is the fact that S&P has been able to generate returns more then 40% in only 5 out of 77 years. At the same time it has given negative return of 40% in just one financial year. • The high relative frequency bandwidth is only visible in the 15-20% positive data and 0-10% negative data. The other data points seems evenly clustered. POINTS TO LEARN:- • Dont expect super-normal returns year on year from the stock market. Any trader who is expecting a repeat of FY09-10 performance in FY10-11 might well be terribly disappointed. • In Indian context we are somewhere in the middle of an intermediate TOP (+/-4%) While the upside in immediate context is capped the downside will open unless the companies perform on the quarter four expectations. • A traders delight market is one with a constant maintained trend with low volatility wherein stop-losses are trailed and not hit. The markets were a traders delight since 4675 was hit on February 08,2010. Regards, Vinayak www.Niftyviews.com VIEW LIFE NIFTY CHARTS AT http://niftyviews.blogspot.com/p/live-charts.html -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
