Comments on: Trading Strategy: Semiconductors Lead the Stock Market

By: thedude

thedude — Sat, 30 Aug 2008 16:22:25 +0000

Thanks so much for the help – I’m a total excel geek so I will probably stick to that for the time being. It’s too bad there is no free source of historical options data…

By: marketsci

marketsci — Thu, 28 Aug 2008 01:07:14 +0000

RE to thedude…sometimes data can be downloaded for free from somewhere like Yahoo (ex. http://finance.yahoo.com/q/hp?s=%5EGSPC). I should note that their data is notoriously a bit buggy, but for most very broad studies like this I feel it’s just fine. Other types of data have to be paid for. I personally like Pinnacle Data (http://www.pinnacledata.com/) because their data is pretty clean, they have a broad selection, and the price is reasonable.

As for analytical platforms, I use a mix of excel, self-created programs mostly using Perl, and sometimes WealthLab (http://www.wealth-lab.com) for strategy backtesting. But don’t let that in any way limit you. There are a lot of other great programs out there that could accomplish the same thing.

In the case of the study above, I used data from Yahoo and crunched the numbers with Excel.

Hope that helps.

Happy Trading (and Researching),
ms

By: thedude

thedude — Wed, 27 Aug 2008 21:01:14 +0000

Thanks for the clarification. I’m actually new to this kind of analysis, and I was wondering, where does one get the data to do this, and what platform do you use to actually carry out the analysis? Any help would be appreciated.

By: marketsci

marketsci — Wed, 27 Aug 2008 04:40:54 +0000

RE to thedude

That’s correct, the SOXX can increase with the S&P decreasing or the SOXX and S&P can both decrease with the SOXX decreasing less. Of course, that’s just how I approached the problem – other combinations might yield better results (don’t think I ran too many iterations of this as it was just a proof of concept).

Hope that helps.

Happy Trading,
ms

By: thedude

thedude — Tue, 26 Aug 2008 14:30:38 +0000

One clarification on the strategy: Do both the SOXX and S&P need to actually increase intraday to trigger a buy in the S&P the next day, or can SOXX increase with S&P decreasing? Can the SOXX and S&P both decrease, with SOXX just decreasing less intraday?

Thank you.

By: Midweek Smeagol Reading | Condor Options

Midweek Smeagol Reading | Condor Options — Mon, 25 Aug 2008 02:53:13 +0000

[...] MarketSci expands on the notion that the SOX (semiconductors) is a fantastic one-day leading indicator for the S&P 500. Fascinating stuff. [...]

By: marketsci

marketsci — Thu, 21 Aug 2008 16:56:41 +0000

Eber – I completely agree. SOXX will eventually fade away (or is fading away now) and will be replaced by something else as a leading sector. Having said that though, I wouldn’t be too quick to dismiss the SOXX continuing predictive-power today. From a return perspective, it has lost some steam recently, but it still appears to be doing a very good job at protecting against market downturns (the most recent one being a good example).

I always enjoy hearing smart commentary like this. Hope to hear more from you in the future Eber.

Happy Trading,
ms

By: eber terandst

eber terandst — Thu, 21 Aug 2008 16:49:40 +0000

Looking back really long ( 50’s or even earlier), each period in the market has had some kind of sector that worked as a leading indicator. SOXX is, apparently, the one that is performing that role today.
However, these leadership role tends to fade away in time. Consumer electronics in the 60’s, as an example, went the same way.
If you look closely at the graph, you will notice that the SOXX leadership curve is reducing is slope. In my opinion, a sign that its leadership is begining to fade.
Unfortunately, most of of these leading indicators are visible only in retrospect. At least that is the case for me. Maybe sharper observers can play the game better.
Eber

By: Thursday links: ads about nothing « Abnormal Returns

Thursday links: ads about nothing « Abnormal Returns — Thu, 21 Aug 2008 16:44:08 +0000

[...] “When the SOXX [semiconductor index] outperformed the broader market, the stock market performed considerably better the next day.” (MarketSci Blog) [...]