• Skip to primary navigation
  • Skip to content
  • Skip to footer
Daniels Trading

Trade Futures, Spreads and Options with Confidence.

Top Navigation

  • Open a Futures Account
  • Sign Up
  • Log in
  • 1.800.800.3840

Primary Navigation Menu

  • About
    • Who We Are
    • Services
    • Risk Disclosure
    • COVID-19
  • Trade
    • Broker-Assisted
    • Self-Directed / Online
    • Request Pricing
  • Hedge
    • Ag Marketing Plan
    • WASDE Analysis
    • Grain Resources
    • Livestock / Dairy Resources
    • Request Pricing
  • Invest
    • Automated Strategies
    • Managed Futures
    • Request Pricing
  • Advisories
    • GENERAL / FUNDAMENTAL
      • DT Newsletter
      • Insider Market Advisory
      • Turner’s Take Newsletter & Podcast
    • TECHNICAL ANALYSIS
      • The Cullen Outlook
      • Data Feed Trade
      • Jarboe Trading Journal
      • Trade Spotlight
    • AG MARKETING
      • Cattleman’s Advisory
      • Technical Ag Knowledge
      • Turner’s Take Ag Marketing
    • THIRD-PARTY RESOURCES
      • CFRN
      • Moore Research Center, Inc. (MRCI)
      • OptionWorks®
      • TASMarketProfile.com
  • Education
    • CME Group Resource Center
    • CME Group Offers
    • Small Exchange Resources
    • Guides
    • Frequently Asked Questions
    • Order Entry Handbook
  • Blog
    • Futures 101
    • Ag Marketing
    • Tips & Strategies
    • Trading Advisories
  • Resources
    • Trading Software
    • Quotes and Charts
    • Futures Calendars
    • Contract Specifications
    • Margin Requirements
    • Futures Calculator
  • Accounts
    • Apply
    • Access My Account
    • Funding
  • Contact
 

Quantifying Stock Market Sentiments

November 6, 2020 by Frank Kaberna| Tips & Strategies

If anything can be gleaned from the intersection of markets and politics over this election, it’s that stocks delight in stability and abhor chaos. This idea isn’t novel or groundbreaking. In fact, it’s been iterated and reiterated by several pundits across almost every network in the last week.

But what does this mean for traders? Can “delight” or “abhorrence” be quantified? Is there opportunity as the collective lens goes in and out of focus on an event such as the presidential election?

To answer these questions, assumptions need to be made:

  1. Delight = +3% daily move in Small Technology (STIX)
  2. Abhorrence = -3% daily move in Small Technology (STIX)

Why +/-3% daily moves? They occur about 5% of the time, which equates to two standard deviations; and STIX has witnessed 2 such moves in the last 5 trading days (40% of the time).

Gain exposure to popular markets with standardized tick values and expiration dates on the Small Exchange. Learn More >>

11062020_ Chart
Source: dxFeed Index Services (https://indexit.dxfeed.com)

Human nature around these outliers usually dictates that, “the market is crashing/flying, so I should sell/buy.” But there are a few flaws with this plan: you don’t know it’s an outlier until it’s too late; you’ll be inactive for months trying to predict an outlier (ask black swan fund managers); there usually aren’t too many more points to profit from after a +/-3% move.

And then there’s the historical data that says markets are more likely to reverse than continue. It may seem counterintuitive to plan for rain when the sun is shining on stocks, but selling into extreme strength and vice versa has been a consistent trade no matter the market’s mood.

Moody Markets STIX Movement Following Daily Extremes

11062020_StandardDeviation
Source: dxFeed Index Services (https://indexit.dxfeed.com)

© 2020 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading futures involves the risk of loss, including the possibility of loss greater than your initial investment.

New call-to-action

Filed Under: Tips & Strategies

About Frank Kaberna

Frank Kaberna is the head content strategist at the Small Exchange. He produces everything from brochures to videos that inform on the Small Exchange’s products. After earning a mathematics degree from the University of Michigan, Frank traded interest rates at the Chicago Board of Trade. He then worked on the tastytrade Network as a content producer and on-air talent before landing at the Small Exchange.

Subscribe To The Blog

Footer

Site Navigation

  • Frequently Asked Questions
  • About Us
  • Customer Reviews
  • Contact Us
  • Futures Blog
  • Open a Futures Trading Account
  • Media Resources
  • Fund Your Account
  • Legal Notices

Contact Us

StoneX Financial Inc.
Daniels Trading Division
230 South LaSalle Suite 10-500
Chicago, IL 60604
+1.312.706.7600 Local / Int'l
+1.800.800.3840 Toll-Free
+1.312.706.7605 Fax

Connect with Us

Trustpilot
Risk Disclosure
  • Risk Disclosure
  • Privacy Policy
  • California Residents Privacy Notice
  • Terms of Use
  • Back to top
 

Loading Comments...
 

You must be logged in to post a comment.