Fooling Around

I've spent most of the night backtesting trading systems, mostly based on volatility, 3C and a long stochastics. Results in the past are pretty good, results over the last 6 months are not as good, mostly due to the choppiness of the markets. Very short term trades recently have tested the best, at least the highest percentage of winners, but the percentage gains have been hardly worth the risk.

In any case, in poking around the market, the one thing that stood out today, was the exact opposite of what stood out Tuesday night-the Price/Volume relationship. I know it's not a fancy indicator and most people probably don't even understand or are aware of the 4 potential relationships. What stood out Tuesday night was Price Down and Volume Up by a 2:1 margin over the second place pairing. In essence this was a short term oversold reading. This was 1 of 3 things I mentioned on Tuesday that lifted the possibility of a bounce which of course we have seen.

Tonight's dominant relationship is the believe it or not, most bearish relationship-Price UP (yes it's still the most bearish of the 4) and Volume Down. The dominance was even stronger then Tuesday night's with averages like the Russell 2000 coming in nearly at a 3:1 dominance over the next relationship which was as  you'd expect Price up/ Volume Up which by the way is the most bullish relationship, but not when the first is seen in between a 2:1-3:1 ratio over the second. This indicates traders backing away from chasing higher prices.

Of course this is still a very fundamental market or news driven and the employment report at 8:30 will take center stage. Remember with news, it is never the news that matters, but how the market react to the news.