On Fear Outweighing Greed, and Vice-Versa

“I can’t sleep” answered the nervous one.
“Why not?” asked the friend.
“I am carrying so much cotton that I can’t sleep thinking about. It is wearing me out. What can I do?”
“Sell down to the sleeping point”, answered the friend.

~ excerpt from Reminiscences of a Stock Operator



Apparently the 12,000 level of the Dow is bullet proof and able to repel the most bullish green or white candlestick, and turn it red or black...fast. It always seems like bearish days are much more intense than bullish ones; day ranges during down days appear to be wider than bullish days. Of course, anything can seem exaggerated when you are on the wrong side.

Looking back nine years, I pulled intra-day QQQQ data and sorted from worst day percent to best day percent for each year. After averaging the worst ten days and then averaging the best ten days for each year, and using the absolute values for graphing purposes, you can see that the results are sort of as expected with maybe the exception of 2002. The higher the line on the chart, the wider the day range (and the longer the candle for you candlestick guys). The gray bars on the chart represent market performance for each year, and corresponds to the secondary y-axis on the right.

The red line which represents an average of the ten worst performing days for each year, has been above the green line which represents the best ten performing days for each year, seven of the nine years. I expected a wider gap between the lines initially. This is probably because the word "bloodbath" or something like that is often used to describe a very bad (down) market day. Come to think of it, I'm not sure what a really good day would be called...maybe the opposite of bloodbath which I guess would be a "skinfest?"




As for the Cheetum Market Indicator, it is firmly planted in old Mr. Partridge's pocket for now...

which brings me to yet another Reminiscences quote...

I think it was a long step forward in my trading education when I realised at last that when old Mr Partridge kept on telling other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements-that is, not in reading the tape but in sizing up the entire market and its trend.