Ron Griess of of The Chart Store directs our attention to this particular chart (below).

If you want to know why indicators using any form of advance/decline data do not work as well as they used to in the past, perhaps this chart might provide some clues.

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click for larger chart

Category: Technical Analysis, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

5 Responses to “The Impact of Unchanged NYSE Issues”

  1. cfischer says:

    Umm, couldn’t you just redefine your filter to say Price +-.06 = Unchanged?

  2. [...] On the disappearance of unchanged stocks.  (Big Picture) [...]

  3. TapeReader says:

    Hi Barry,

    Advanced\Decline may not work so well, but reading order flow from the GLOBEX servers at the CME is a better option.

    IMHO, changes in price are predicated in changes in supply and demand.

    On publicly traded exchanges, order flow offers great insight into the immediate changes in supply and demand for more reasons than just the increase in decimalization (though GLOBEX does trade in nice fat tick increments).

    We are launching a free service that shows order flow momentum via a real-time heat map on http://www.algofutures.com

    We are still filling in content in the site, but the e-mini S&P 500 Order Flow Momentum can currently be viewed in either Chrome or Firefox (IE is still cranky with the video feed).

    Feel free to monitor the market there as these Order Flow Heat Maps offer quicker signals than Advanced\Decline ever has, and it offers a pretty cool indication of where price is going to go.

    Barry, this is a good example showing that as markets evolve, indicators must evolve along with them.

    We will be expanding the site with more examples and expect to have a fix for IE soon.

    Hope that you find this interesting and/or helpful.

    C

  4. mathdock says:

    cfischer is spot on. Now, it won’t reflect the same info as in the good old 1/16th days, BUT it will correlate VERY well. Actually the hard part of doing that is recalculating it from the stock issues themselves. You can’t take the actual Adv/Dec/Unch summaries from the papers. SO, is it worth the effort?

  5. RW says:

    dfischer is on to something and designing a filter to evaluate a price as unchanged if the current close and previous close were less than some absolute value apart wouldn’t be difficult. Using some small increment of each stock’s standard deviation might compensate better for noise though.

    The chart brings up an interesting point which is that a penny or even 1/16 dollar is probably smaller than the least significant figure of most stocks; that is, measurement of a stock price is rather granular, a debate over time, and while very small moves of a penny or even less can lead to profit for the nimble (or unscrupulous) trader there is actually little or no information in moves that small (although a good signal processor algo might tell you if someone was manipulating order flow).

    This also implies a straightforward explanation for the common phenomenon of reversion to the mean: Rather than some mysterious tendency it is a function of coarse measurement; there is a central tendency in the price of traded issues but prices always oscillate around it, never settling.

    NB: When I first began trading, stocks were still priced in eighths and commissions were commensurate: You sure didn’t do much volume in those days as spread and commissions alone could wipe you out fast never mind what the bloody company was doing (slippage wasn’t a minor problem that’s for sure). The move to sixteenths and removal of fixed commissions helped the trader even if they were not beneficial to the market maker unless he could generate order flow but volume went up steeply after that and even more steeply yet after ‘decimalization’ so, for most, order flow made up the difference (yeah, they often had to pay for that flow, but making a living is making a living).