Editor’s note: This was originally published as a research note for clients if Ned Davis Research on February 10, 2014 and is reprinted here with permission. Ned will be expanding on his work in a presentation at the MTA Annual Symposium in April. Our work shows that volume (particularly, demand volume) precedes price. Demand volume peaked on 5/21/2013 well before the DJIA peak on 12/31/2013. Then the NDR Volume Demand Index broke an uptrend line going back to the 2011 lows. If volume precedes price, this is a warning sign that the bull market is at risk. While I consider the violation of the uptrend line on volume demand to be a warning sign, I do not consider it a sell signal yet for two reasons: Demand is still above supply, and As shown in the next chart, on a short-term basis, volume supply so overwhelmed demand last week that the market got very oversold

Editor’s note: This was originally published at TrendFollowing Trader and is reprinted here with permission. The charts in the article can be enlarged for easier viewing at the web site. What is it? Taking a loss is a typical definition of whipsaw. If you manage financial risk using protective stops, you’ve experienced it. People generally don’t like the feelings that arise when whipsawed in the markets. You’re losing money.  What’s to like about that? People view these feelings negatively. We tend to avoid what we dislike. People tend to avoid taking losses, fail to re-enter a winning position, or entrain some combination of both in order to avoid whipsaw. Negative whipsaw feelings intensify through the combination of the following: speed of loss, numbers of losses, and overall loss amount. A negative emotional turbo-boost occurs when you take a loss on a position before it turns tail and trends in your direction. The feeling

Editor’s note: This was previously published at The Augmented Trader on January 8, 2014 and is reprinted here with permission. Dr. Balch will be a presenter at the MTA Annual Symposium in April. Low volatility stocks and ETFs seem to perform better than they ought to. In recent years they have provided similar returns to the overall market, but with lower risk. This phenomenon is referred to as “the low volatility anomaly.” We take a statistical look at the question to see if we can find clues to explain it. What is the Low Volatility Anomaly? Everybody knows that higher rewards can only come from higher risk, right?  That principle is enshrined in one of the most respected models of stock pricing: The Capital Assets Pricing Model (CAPM). This model says, essentially, that in an up market, the excess return of a portfolio is proportional to the Beta of the portfolio to the