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Macro Picture, Economic Numbers and Trading July 10, 2009

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As we get ready for a G8 summit in Italy, government policies and the macroeconomic environment get much more attention in the press. For those who know how the publishing game is played, it’s easy to see how various interest groups try to persuade the world’s economic leaders by getting timely articles on unemployment figures and oil speculation published, just in time for the summit!

Traders and investors have always fallen into two camps – those that say that outside influences should be ignored and that one should trade only price and the derivatives of price (such as technical indicators, etc.).

The second group is “all others,” anyone who looks at outside influences and tries to “take the temperature” of the market and its response to events and economic trends. This group can range from the technical traders who keep an eye on world events and economic news so they don’t step in front of freight trains, all the way to the fundamental players who try to position themselves for long term moves based solely on what’s happening in the bigger picture.

I won’t take sides in the debate, because as Van says, you have to trade or invest in a style that fits you. But, almost all traders and investors will do well to understand the major outside forces that are influencing markets. And this is especially true for ones that have an immediate impact on price movement.

Economic Reports – Don’t Sleep on These Important Events

The government puts out many economic reports in varying frequencies (weekly, monthly, etc.). These are issued under a strict protocol of secrecy so that no one can gain an advantage by knowing the results before the announcement. (If anyone remembers the movie Trading Places with Dan Akroyd and Eddie Murphy, you’ll remember a compromised crop report was a central part of the plot.)

It’s very interesting (not to mention extremely useful) to follow what economic reports are moving the market at any given time. The public in general and market participants in particular run through cycles of perception where one or more governmental economic reports take on a very high level of scrutiny, and therefore impact the markets, while others barely even register a tick or two of price movement.

The reports that have the biggest impact certainly vary over time. What was important a couple of months ago, may have very little impact today. Here are some examples from the past:

· In the 1970s, the BIG number was the weekly money supply figure that came out on Thursday. Legend has it that a six-figure betting pool was run each Thursday at Bear Stearns; unsubstantiated rumors have indicated that my business partner and market maven Christopher Castroviejo was in charge of the pool…

· 2007 and 2008 saw the housing numbers (new home sales & starts, existing home sales, etc.) as highly watched numbers; they still have a little market impact today, but much less so than in their prime.

· During the spring and summer of 2008 the weekly oil inventory report was a major market mover.

The current major movers are the employment reports. Market players are currently giving high levels of scrutiny to both the weekly report (Initial Claims) that comes out on Thursdays and the monthly gaggle of numbers (Nonfarm Payroll, Hourly Earnings, Average Workweek, and Unemployment Rate) that is reported on the first Friday every month.

Keeping abreast of what reports are really having an impact can help your trading efforts or at least keep you out of harm’s way during the announcement.

Great Trading!

D. R.

The Golden Cross: Rare and Useful but Overexposed? July 3, 2009

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Few technical indicators have been more discussed in the past couple of weeks than the fabled cross of the 50 day simple moving average (SMA) above the 200 day simple moving average in the S&P 500 cash index.

This is the legendary “golden cross”, a most bullish of signs for long term trend followers. And one occurred at the market close last Tuesday (6/23/2009). The last time this happened was in September of 2006. Here is a chart that shows these last two occurrences.

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It’s hard to imagine a more broadly recognized technical indicator. I entered four words into Google—golden, cross, moving, average—and got 2.1 million results.

I have to be honest: I didn’t have time to read through all of them.

But the ones I did peruse yielded some interesting comments. As with most technical analysis concepts, there were folks around with an ax to grind. The efficient market crowd was out in force yearning to prove that there is no edge in the market. Tech analysts added in their favorite filter to show (in hindsight) what would have worked.

But the more balanced research pieces provided some useful insights.

The Overview

In general the 50 / 200 cross provides a moderate statistical edge over buy and hold. If one models an always-in-the-market strategy of buying an index when the 50 SMA is above the 200 and reversing to go short when the 50 drops below the 200 (a signal known as the death cross or the black cross), one gets the normal results of most long term following strategies: a positive edge from a system that does well in trending times and then gets whipsawed in sideways markets.

Some of the most useful studies I saw showed the following:

* The only study I found that entered on the golden cross and went flat on the death cross signal showed a clear advantage for all stocks and indexes except ones like Apple, which had a clear upward move through the 10 year test period. The most interesting thing said in this research piece was that timing methods worked better in most periods than buy and hold, except for markets that are in a strong uptrend for an extended period. For any stock or index that showed a deep drop during the test period, the “buy golden crosses and go flat on death crosses” method outperformed buy and hold by a very significant margin.
* A friend and very serious researcher looked at an always-in-the-market version of the strategy from 1981 through the present using S&P 500 cash index. The method returned more than 10% per year annualized and showed only 20 total changes in direction during this 28 year period.
* Another interesting but less reliable study looked at only golden crosses back to 1929 using Dow Jones 30 cash index data. They added a filter, which reviewed just the signals that occurred during a recession. There have been 14 since 1929, and 13 have produced positive gains when closed out one calendar year later. This study has too few data points to be statistically significant, but it does show a glimpse of why so many people keep their eye on this indicator.

So should we run out and load up on the long side of the market now, based on this signal? I think the body of evidence supports the usefulness of the indicator, and those who have a long bias will find that more than a few institutions out there will be changing their portfolio balance based on the signal.

The competing argument is that the current market is already overbought based on the rise off of the March 9th bottom and that the fundamental and economic picture still favors the bearish side for quite some time.

For me, the overarching factor in the markets today is all of the cash that has been injected into the market by the U.S. and other central banks. With that unprecedented bankroll, this bullish party can last for quite some time. It certainly has lasted long enough for the fairly rare golden cross to show up. Knowing all that excess money is out there chasing after a home, I can’t get too bearish until the market really shows some downward momentum. But because of the monstrous amounts of artificial capital stimulus, when its effect starts to run out and the next breakdown happens, it could be a whopper.

Great Trading!

D. R.

Cutting Off the Left Side of the Bell Curve Part III June 26, 2009

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Imagine working on a project where you’re building something—let’s say a storage shed in the backyard.

You pour the concrete foundation, and then you start framing in the structure. Walls go up, and then you put in the rafters to support the roof. After a couple of weeks of good work, it really looks like you’re building something special.

Then one day, you make a mistake. And then another. And the whole structure comes tumbling down. Weeks of work destroyed in just a couple of poor moves.

While this seems somewhat silly, almost absurd, it is exactly what happens to many traders’ accounts.

They spend weeks or even months building up the equity in their accounts, only to give it all back in one or two bad trades or one or two poorly managed trading days.

For the last two articles, we’ve been talking about managing the left side of the equity curve: finding a way to minimize individual and cumulative losses.

Last week we looked at a bell curve and talked about knocking out those trades that make up the “tail” of the loss side of the bell curve—the big losing trades that end up being more than twice as big as originally planned. Van rightfully classifies all of these trades as “mental errors” (all that are not caused by overnight gaps, etc.).

Today we’re going to talk about those days (for intraday trades) or weeks (for swing and longer term traders) that eat up weeks or months of profits.

These are the days where a trader enters into a downward spiral of losses that seem to compound and grow with every trade. Not only are mental mistakes made, but they are increased as the trading period continues. Mistakes like these come in bunches:

* Continually fighting a trend. When a trader tries to catch an exhaustion move or find a turning point in a strongly trending market. This can happen to day or swing traders. With each further extension of the trend, it seems like this has to be last gasp; surely this thing will turn around here! But losses mount, and without a way to break the cycle, they get worse and worse.
* Competitive or revenge trading. In our e-mini bootcamp that we’re holding this week, we have found this to be a mental mistake that rings true with so many participants! Having a trade go against you and following it up with a low-quality trade just to “have a winner” or to “show the market who’s boss” can lead to a series of trades that are pure equity killers.
* Any period when our trading strategy is not matched with the market (e.g., trend following in choppy markets, or counter-trend trading in trending markets). If our trading plan doesn’t have a good way to minimize trading in these periods (or stop trading all together), then trading losses can add up quickly.

Tools for Protecting and Managing the Left Side of the Equity Curve

Fortunately, we have some good tools at our disposal to manage these losing periods:

* Good old fashioned stop losses. Most people reading this article are familiar with the use of stop losses. But knowing about them and using them in an unwavering manner are two different things! And until one uses stops with unswerving discipline, then nothing else will make any difference. This is the foundation to managing the left side of the equity bell curve.
* Understanding our trading systems and strategies. The better we understand our strategies, the less likely we will be to trade or overtrade the strategy in a market where it performs poorly. I’ve often said in system design classes that I really like trading systems that have some self-regulating mechanisms in their designs that help them trade less often (or not at all) in unfavorable markets.
* Using a “circuit breaker”. Almost all traders can benefit from using some sort of loss circuit breaker—a rule that makes the trader shut down after a certain loss for the day, week or month. This idea alone can help traders to manage those tails at the far left of the equity bell curve.

Thanks to all of you who have sent in your stories of mistakes and managing the left side of your bell curve! I’ll summarize some your great ideas next week. Anyone who would like to submit stories can send them to drbarton “at” iitm.com.

Until next week…Great Trading!

D. R.

Cutting Off the Left Side of the Bell Curve Part II June 19, 2009

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Today’s quote is from an author whom I greatly admire. Peter Bernstein lived a very full 90 years and passed away earlier this month. He will be remembered for many endeavors including investing, but his richest public legacy is almost certainly his broad and deep body of writings.

One of my most favorite investing books is his book Against the Gods: The Remarkable Story of Risk. While his earlier work Capital Ideas: The Improbable Origins of Modern Wall Street is his best known book, I really love the wide and sweeping historical nature of Against the Gods. It is a great read, especially if you like hearing stories about the mental giants through the years.

Bernstein’s quote is a restating of the problem that I spoke of last week: so many traders and investors go through a period of being right (having a run-up in their equity curve) only to make mental errors and give back those profits, usually more quickly than they were first made.

I discussed the concept of cutting off the left edge of the trader’s bell curve last week. In short, this means minimizing or eliminating those really big losers that make up the far right side of one’s trade distribution.

And last week I also introduced the concept of cutting short time periods of poor performance—those days, weeks or months when the fruits of profitable labors are tossed out the window.

I don’t know how many times traders have shared with me the story of going on a great winning streak, even lasting long periods of time, only to give it all back in one day or few days because of a break in discipline.

I specifically thought of Bernstein’s Against the Gods because of his excellent narrative on Carl Friedrich Gauss, the father of the bell curve (also known as a Gaussian function). The bell curve derives from data described as a normal or Gaussian distribution. The key characteristics of normal distributions are that they are independent data points, and they are clustered around a mean.

From the perspective of traders, it’s useful to think of all of trades, from the biggest winners (the far right side of the curve) to the biggest losers (the far left side) and everything in between as a bell curve. Here’s a nice graphical representation of a generic bell curve (from Wikipedia).

Of special note are the following statistics:

* Data residing +/- one standard deviation from the mean make up ~68.2% of all data in a normal distribution.
* Data at +/- two standard deviations account for 95.6% of all normally distributed data.
* At +/- three standard deviations, you capture 99.8% of the data that makes up the bell curve.

This makes it visually easy to conceptualize what we mean by managing or cutting off the left side of the bell curve—if the biggest losses or biggest losing days or weeks can be eliminated or minimized, then life becomes much easier for a trader.

But how do we do that? Some insight into the process used to cut off the left side of the bell curve comes from Van’s assertion that almost all losses bigger than -2R are mental errors. (-2R means a trade that lost twice the intended initial risk or stop loss.) Clearly there are exceptions (overnight gaps for non day traders, for examples), but I believe Van’s concept holds true.

Next week we’ll look at three specific actions traders and investors can take to manage the left side of their trading equity bell curve.

Until then, I’d be very interested to hear some of your stories—what psychological issues have you had to overcome in your journey as a trader or investor? What issues still stand in your way of getting to where you want you go? Please send your thoughts, stories and comments to drbarton “at” iitm.com. I will not share or disclose any names if I use what you share (unless you specifically ask for acknowledgement).

Great Trading!

D. R.

Cutting Off the Left Side of the Bell Curve June 12, 2009

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“The mechanics of profitable trading are reasonably simple. The psychological impediments to profitable trading are numerous, obstinate, and wily.” –Richard D. Ahrens

The quote that was chosen by Cathy for last week’s edition of Tharp’s Thoughts (and shown above) rang so true to me.

While traders and investors can implement some strategies and systems that are fairly complex, most of the robust ones used are much less complicated. And the mechanics of implementing those systems are, in fact, fairly simple.

Ahrens is right: the majority of this trading game is about mastering the trader, not mastering the trade.

With that said, let’s look at the first and most important issue of managing the trader: managing losses. It’s clear that to have a profitable strategy or account, the profits must exceed the losses. (Thanks, Captain Obvious). And there are actually many ways to make that happen.

Van is one of the people most responsible for helping the trading community understand that profits aren’t all about winning percentages. He has helped people understand what long-term trend followers like Ed Seykota have known and practiced for years: As long as the average size of your winning trades is sufficiently bigger than the average size of your losing trades, you can profitably trade a strategy that wins less than 50% of the time.

One can also have a strategy that makes money by combining a winning percentage that is significantly higher than 50% with average winners that are about the same size as average losers. And though they seem to be much less robust, there are strategies with very high winning percentages where the average loser is bigger than the average winner.

But the thought I’d like to leave you with today is the importance of managing your trading equity not only on a trade-by-trade basis, but also on a day-by-day basis (for day traders) and a weekly or monthly basis for swing and long-term traders.

When talking with traders, one issue in particular is most commonly mentioned: giving back profits from a period of profitable trading, even weeks’ or months’ worth, in one or two trading sessions or maybe one or two trades.

This is the problem that Ahrens talks about—psychological impediments to good trading practices. This is what my good friend Ken Long calls “managing the left side of the equity bell curve.”

Next week we’ll look at this issue a bit more quantitatively and discuss some potential tools and fixes.

Until then, I’d be very interested to hear some of your stories: What psychological issues have you had to overcome in your journey as a trader or investor? What issues still stand in your way of getting to where you want you go? Please send your thoughts, stories and comments to drbarton “at” iitm.com. I will not share or disclose any names if I use what you share (unless you specifically ask for acknowledgement).

Great Trading!

D. R.

Is the U.S. Dollar Getting What it Deserves or Is This Just a Cyclical Move? June 12, 2009

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I just spent five days in lovely Vancouver, British Columbia. I was there with my best pal and business partner Christopher Castroviejo lecturing at an investment conference.

As with every trip north of the border, I find the Canadians to be an extremely warm and friendly group of people. And Vancouver is an especially cosmopolitan city, with a broad and deep diversity of inhabitants from various ethnic and national backgrounds. I had world class French, Italian and Japanese meals all within walking distance of the hotel.

Those friendly Canadians also have a strong sense of national pride (as well they should). The most frequently asked question at the conference was whether we thought the Canadian dollar would not only get back to parity with its U.S. counterpart, but whether it would eventually grow to 1.50 or 2.00 Loonies per American Greenback.

The world of currency exchange is fascinating and the possibilities are almost endless; however, I don’t see any way the Looney/Greenback relationship will get that far out of kilter.

Sure, the U.S. central bankers have been promising, printing and spending dollars like a bunch of drunken sailors on shore leave. But practically all of the other central banks have been doing the same to some degree. The real issue that will moderate the Canadian/U.S. exchange rates is the amount of trade done between the two countries. A whopping 85+% of Canadian exports go to the U.S. It is hard to imagine a currency swing to 1.50 Loonies per Greenback; the Canadian dependence on the U.S. as a trading partner just won’t allow it.

That being said, some interesting things are happening in the world of currencies. The persistent strength of a broad spectrum of currencies against the U.S. dollar has put the Euro currency and others in an overbought position that is likely to be relieved, at least in the short to intermediate term. In the last year, the Euro has only been “classically overbought” versus the dollar a couple of times, as seen below.

Within days of becoming overbought, the Euro retreated significantly in both December and March. This trek into overbought most likely will yield another pullback. One other thing is clear: when the stock market is hitting periods of fear, the world flocks to the safety of the U.S. dollar. In the chart below, we see that when the stock market has hit its low points (in November of ‘08 and March of ‘09), the Euro approaches it lows as cash retreats to the dollar.

If the stock market remains strong for a few days (or weeks) longer, then count on the Euro remaining strong as well. But when the market retreats, look for the Euro to give back some of these gains; this correlations will stay in effect until the cycle is broken by some macro event.

And while we’re on the topic of currencies, here’s an interesting comparison of the percentage moves of the some major currencies to the S&P 500 since the market top in October 2007.

As you can see, the Yen has been the strongest currency by far, with the British Pound lagging. The Yen is clearly the least correlated of the four currencies in the chart, showing that its relationship to the dollar is unique in the current climate.

What conclusions can we draw from these studies? First, there is not yet a real mandate (in terms of price action) indicating that the profligate spending of the U.S. will push the dollar’s value down from now on. The more likely scenario is that the dollar will gain strength whenever fear comes back into the market. In the much longer term, the unprecedented printing of capital will certainly erode the value of the dollar; but for the short to intermediate term, other market and psychological factors continue to play a strong role.

Great Trading!
D. R.

Some Much Needed Perspective on the Current Rally Part II June 2, 2009

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Two weeks ago, we looked at the market’s strength as the S&P 500 index had its second down day (Tuesday 5/12) after what proved in hindsight to be at least a short term exhaustion top. Media hype over that run-up from the March lows was getting pretty loud. We looked at the math of bounces and some retracement lines to add some perspective.

Today (late Tuesday night 5/26), we find ourselves within one S&P 500 point of that close two Tuesdays ago! We’ve traded down, up, down and then back up today, all with a 45 point S&P 500 range. But tellingly, we haven’t made a new high since May 8th.

Once again, I feel obligated to state that the move off of the March 6th lows has been impressive. But to paraphrase someone’s quote I can’t find using Google, “Give me 1.7 trillion dollars, and I could throw a whale of a party, too.”

I’m not convinced that this leg up is over, but I don’t think that there is much cause for rejoicing. Last week we saw that the S&P 500 had not even retraced 25% of its down move from October 2007. To throw even more water on the flames that so many pundits are trying to fan, let’s look at how the S&P has fared versus good old fashioned gold.

Ouch! That’s some ugly perspective for us to chew on: 29 years of stocks versus gold. Yes, gold has gone up in price since the market was soaring in the Internet bubble. But the retracement we witnessed over the past couple of months is barely a blip on the radar screen…

Last week I mentioned that there were five significant rallies in the Dow during the Depression’s bear market. The folks over at chartoftheday.com have put those rallies in a nifty graph showing percent rally drawn versus rally duration. They have conveniently added the current bear market rally to compare and contrast.

This chart shows the magnitude of rallies that can occur with rallies lasting almost half a year and bouncing up almost 50%. Fast six week rallies carried us up 35% back when things economic were very bleak indeed. The fact that we’ve rallied neither as far nor as fast may be disconcerting, but it also gives hope that the rally isn’t over. I’ll be looking for whether we can eclipse that May 8th high with any conviction in the next couple of weeks. If so, we could sustain this leg up for quite some time. If not, the rally is likely to die under the weight of the gaudy expectations that have been heaped upon its still unproven shoulders.

Great Trading!
D. R.

Some Much Needed Perspective on the Current Rally May 19, 2009

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“Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble… to give way to hope, fear and greed.” Benjamin Graham

We’re going to take a break from our series on no-cost and low cost stock screeners to look at some interesting perspectives on the recent market price action.

It’s easy to get sucked into the hype that the media produces for us. And right now that hype is around the “record” move up that the stock market has made over the last couple of months. Let’s look at some math and then a chart that help to put the move into perspective.

First, the math. After an asset has dropped almost 60% in value, it’s easy to have a big percentage move up from that low price. For example, if a $10 stock drops to $4, and moves back up to $5.60, we could talk about the amazing 40% move up that it has had from its low, especially if we wanted to position things with a positive spin. Or sell newspapers or TV ad time. Or push forward an agenda.

Sure, such a move is impressive (and lucrative for those who bought near the bottom), but it really obscures what’s happening in the bigger picture. Let’s look a chart of the S&P 500 with some Fibonacci retracement lines drawn from the October 2007 highs to the March 2009 lows.

At the most basic level of analysis, we can see that this “historic” upward price move has not even come close to a 38.2% retracement (the first key level of price retracements in the Fibonacci world).

My favorite market analyst and good pal Christopher Castroviejo reminds me that even during the market crash of the late 1929 and subsequent Great Depression, there were no fewer than five rallies of 40% or greater. So this up move, while it breathes some hope into the market, is by no means definitive yet.

Would I love it if the economy righted itself and things just rocketed up from here? Sure! Economic downturns are tough on a broad range of folks, so pulling out of that would be really nice. But I’m also a realist; the economy has shown some signs of life, but I believe they are much smaller than one might expect given the truly massive and unprecedented amount of money that has been shoveled into circulation.

Next week we’ll look at this retracement move using a couple of other very interesting tools (some ratios, for example).

Until then…

Great Trading!

D. R.

Stock Screening – Prep for Technical Scans May 12, 2009

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I’ve been on a golfing quest over the last couple of weeks to buy a replacement set of irons. The Ping Zing 2s in my bag have been faithful servants. But my son Josh now plays on his high school golf team, and I’m hoping a little technology will help me keep up. The dad in this family has no plans to concede golfing supremacy to his 14 year old son without a fight. But I do recognize that I’m losing the battle; he’s getting bigger and stronger every day—and me? Not so much.

As you can imagine, my quest for the right set of irons has been a fairly extensive one. I’ve read online reviews (there aren’t that many good ones) and talked to good golfers that I know. Today, I even had an hour-plus fitting session with my golf coach. I know my best length, lie angle, shaft stiffness, etc., but even after hitting about 200 balls with 10 different clubs from four different manufacturers (or maybe because of that), I still don’t know which set I’ll choose.

I have found that selecting a new golf club or set of clubs is a VERY SUBJECTIVE endeavor. And perhaps more importantly, because of the different swings, levels of development and goals of golfers, what’s perfect for one player is not the right fit for another. Sounds a lot like matching trading styles, systems and strategies to individual traders…

Here is the truth: there is no one best system, strategy or style. Van’s main thesis in his must-read book, Trade Your Way…, is that no Holy Grail in trading system exists. There is no one great system out there, hidden and secret and only discovered by the choice few. Instead, the Holy Grail of trading is finding a strategy or style that has an edge in the markets and that fits you. And so it is with golf clubs. And with stock screeners.

Like a good trading strategy, a good screener has to meet certain functional requirements. Here are some must have items:

• An export of results in a standard format (spreadsheet protocol).
• A very broad base of stocks (preferably the whole universe of stocks, but inclusion of all stocks from one or multiple exchanges or broad indexes is at least useful and won’t get you disqualified).
• Quick scans (in the last few years, this really hasn’t been a problem)
• Sufficient scanning criteria (filters) to make it useful.

Here are some nice items to have:

• Easy to use interface.
• Ability to save scans.
• Low or no-cost options.
• Ability to sort scans in the online results without having to export.
• Customizable or programmable scans.

The lists could go on, but you get the point. The importance of these individual items will vary from user to user.

So sadly, there is no “one best screener” for everyone. But next week we will start to dig into the details of the online low and no-cost screeners that offer some sort of technical scanning ability.

Thanks to everyone who wrote in to give tell me which technical stock screeners you like. Some good ideas and points were made by almost everyone. Please send any suggestions/thoughts/reviews of your own to drbarton “at” iitm.com. Until next week…

Great Trading,
D. R.

More Top Notch Internet Resources Part VI Stock Screening – Google Finance Falters May 5, 2009

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Last week we ended by talking about Google Finance’s use of Web 2.0 tools to make an addictive little screener. And it is truly fun to play with. But alas, when the playing is done and it’s time to get down to some real work, Google Finance’s stock screener really has little to offer.

First the good stuff about the Google screener. Compared to almost every other screener, it’s easy to find. A little thing, I know, but it’s frustrating trying to go through the multiple layers of web pages to get to some of the better no-cost screeners. At the top of the Google Finance homepage, right next to the ubiquitous Google search box, is a single hyperlink, the stock screener (in typical Google minimalist style).

Once you get to the screener you’ll find four default screening criteria with boxes for minimum and maximum values. The truly unique part is the slider that’s between the min/max boxes. Between the min and max sliders is a little histogram that represents how many stocks are at each increment of the slider. Cool. For most criteria, this looks like a normal distribution, with some skew to one side or the other. What makes this really fun is that if you move one of the min or max sliders to reduce the universe of stocks, you get instantaneous feedback on how many stocks satisfy the scan, plus a sortable list of stocks that meet all of the criteria. And when I say instantaneous, I mean less than a second.

As Google has set this up, it’s a very visual process, but I’ll try to describe one example for you. With all of the criteria set as wide as possible, Google shows 2,950 stocks. Move the ‘dividend yield’ minimum value slider to the right from 0% to 5% and the universe is reduced to 512 instantly sortable stocks. You can do this with 61 different criteria that Google provides, if you so choose.

But the good news pretty much ends there. The minus side of the ledger is unfortunately well populated for the Google Finance screener. And there are some deal killers.

First and foremost, there’s no way to export the results of your scans to a spreadsheet or trading platform watch list. And if you devise a scan that you really like or need and want to run it later, there’s no way to save a set of screening criteria. In addition, the universe of screening criteria is fairly limited.

Here’s the bottom line. If you’re just wondering how many stocks have a Market Cap over $1 billion and a dividend yield between 2% and 6%, and you want a lightening quick answer, Google can get you there with a sortable list. But you won’t be able to save or export the scan, making the utility of this Google app marginal at best.

In the end, the Google Finance stock screener is a bit like a Slinky. It’s fun to play with and can occupy you for minutes on end, but when all is said and done, you can’t turn your time and effort spent into anything really useful.

Next week, we’ll start to look at some screeners that scan for technical criteria. So please send any suggestions/thoughts/reviews of your own to drbarton “at” iitm.com. Until then…

Great Trading,