Info!! Flexibility Inwards Viewing Leads To Flexibility Of Doing

If nosotros await at the same things inwards the same way, the odds are proficient that we'll snuff it on doing the same things.  That's bully if nosotros remove maintain a formula for success; non in addition to thence proficient if we're repeating mistakes.  Different perspectives tin cease select fresh perception, in addition to that tin cease spark insights in addition to novel activeness patterns.

One agency I've flora useful to attain flexibility of viewpoint is to rail measures across dissimilar fourth dimension frames.  Above is a nautical chart of my intermediate-term marketplace pull measure, which is a moving average of the publish of stocks inwards the SPX universe making fresh 5, 20, in addition to 100-day highs vs. lows.  It is much less noisy than shorter-term measures in addition to has done a proficient undertaking of cresting ahead of cost during marketplace cycles.  It is every bit good helpful to come across where nosotros stand upward on the intermediate-term stair out when we're short-term oversold.  As y'all tin cease see, we're non nevertheless at levels that remove maintain corresponded to recent marketplace lows.

Still approximately other assist to flexibility of perception is to look, non alone at the stock or index you're trading, but an array of related shares in addition to sectors.  It is non odd to notice weakness or pull seeping into leading stocks or sectors that tin cease serve every bit heads upward for to a greater extent than full general weakness or strength.  The expansion of stocks making novel short-term lows--even when SPX was trading at or nearly its recent highs--was a bully country for weakness that spread to the full general market.

A tertiary agency to attain flexibility inwards perception is to show markets across property classes, non only inside the property cast you're trading.  Influenza A virus subtype H5N1 substitution to agreement recent marketplace weakness has been seeing the rising correlations alongside a publish of macro assets, including oil, high yield bonds, currencies, in addition to stocks.  Those macro correlations are an first-class indication that the drivers of marketplace prices are becoming larger than the dynamics inside your item stock or index.  Earnings for a fellowship may await good, for example, but if global deflationary fears are driving stocks lower, it could travel a large error to assume that overnice turn a profit volition interpret into potent upward cost performance.

In general, nosotros tin cease generate novel views past times either looking deeper into what we're trading or past times looking broader.  By switching our levels of breadth in addition to depth, nosotros tin cease prepare a to a greater extent than consummate thought of the large painting demo in addition to spark those "aha!" experiences that Pb to bully merchandise ideas.

Further Reading:  Perception in addition to Motivation
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Info!! Trading Notes, Calendar Week Of January 18, 2016

Friday, Jan 22nd

*  Yesterday's postal service noted the possibility that nosotros had set inwards a momentum depression for the recent marketplace position cycle.  Price activity on Th was supportive of that hypothesis, every bit nosotros saw real important selling pressure level inwards the afternoon, alongside multiple NYSE TICK readings below -1000.  That was similar inwards selling intensity to the puking nosotros saw at the cost lows, precisely immediately nosotros were asset higher inwards price.  The market's might to brand higher cost lows together with higher highs is what nosotros expression for if we've indeed set inwards a momentum low.  Meanwhile, we've moved higher overnight, 1 time to a greater extent than consistent alongside the momentum depression notion.  (Note the recent important forcefulness inwards crude oil prices, every bit well).  Bottom trouble is that, short-term, nosotros look to travel transitioning from a "sell the bounce" to a "buy the weakness" mode. 

*  Here's a dainty persuasion of breadth amid SPX stocks, which tracks the number of stocks making 5, 20, together with 100-day novel highs vs. lows.  Note how we've stayed oversold far longer than during recent declines; besides banking firm complaint how we're silent inwards oversold territory despite the recent bounce.  I hold back stronger breadth numbers earlier nosotros consider a seek of recent marketplace position lows.

*  Yesterday was the start twenty-four hr menstruum inwards xi sessions inwards which nosotros registered fewer than one 1000 stocks across all exchanges registering fresh monthly cost lows.  Still, alone 46% of SPX shares are trading inwards a higher house their 3-day moving averages together with alone 31% inwards a higher house their 5-day averages every bit of yesterday's unopen (data from Index Indicators).  Those curt term breadth measures should decease on to strengthen if we've indeed seen that momentum low.

Thursday, January 21st

*  We saw concentrated selling early on inwards the twenty-four hr menstruum followed past times a vigorous rally alongside important buying forcefulness that erased much of the day's losses.  The breadth numbers were peculiarly extreme alongside 44 stocks registering fresh monthly highs against 3250 novel lows.  The depth of the oversold condition, combined alongside the vigor of the buying, opens to the door to the hypothesis that we've set inwards a momentum depression for this downward cycle.  With the reaction to the ECB coming together well-nigh recently, we've moved higher inwards trading.  We should consider farther upside follow through together with divergences inwards the breadth information on farther weakness if, indeed, we've set inwards a momentum low.

*  That beingness said, to reiterate a signal made for a piece now, this wheel has been deeper on the downside than cycles over the past times ii years together with is to a greater extent than consistent alongside downward moves inwards 2010 together with 2011 than 2014 together with 2015.  These deeply oversold declines inwards 2008, 2010, together with 2011 eventually went on to brand farther cost lows good later the momentum signal at which we'd maxed out the number of shares making novel lows.

*  Here is an overbought/oversold mensurate that I rail based on number bars rather than time-based bars.  What I expression for inwards a comport marketplace position is overbought levels at lower cost highs; those are ofttimes expert regions for shorting.  In a bull market, yous expression for oversold levels at higher cost lows.  Those are ofttimes expert areas for buying.  In a attain market, you'll consider successive overbought together with oversold levels at similar cost extremes.

Wednesday, Jan 20th

*  Stocks came good off their highs during merchandise Tuesday alongside accompanying crude oil weakness together with that weakness has continued inwards overnight trading.  That has taken us to novel cost lows together with pretty good negated whatever divergences nosotros were seeing inwards the data, every bit noted yesterday.  The of import say inwards Tuesday's trading was the inability of rallies to sustain either inwards fourth dimension or price, every bit nosotros made successive lower highs.  If nosotros were coming off a momentum low, we'd hold back to consider value buyers sustain buying.  When buying is non sustained, there's a expert likelihood that it's to a greater extent than short-covering than initiatory interest.

*  Meanwhile, whether yous expression at VIX, volume, or the pure volatility mensurate that I follow (volatility per unit of measurement of trading volume), all are elevated, precisely none of seen the kinds of capitulation spikes that get got characterized past times sudden declines.  H5N1 interruption of the 2014 together with 2015 lows may aid yield such spikes; it's something I'm watching for.

*  Once again, to emphasize the themes from concluding week's notes, in that location is every prove that this spend upwards is unlike inwards graphic symbol from the corrections we've seen during the past times ii years.  Oversold levels that had led to sustained rallies--characteristic of a attain trade--are no longer finding buying interest.  It is hard to imagine sustaining a movement higher until nosotros tin let on a bottom inwards crude oil together with related commodities.  

*  It is besides hard to imagine the Fed sustaining a programme of charge per unit of measurement hikes inwards the confront of deteriorating fiscal conditions.  The marketplace position spend upwards is getting to the signal where it volition dent consumer confidence.  Note the superior relative functioning of utility shares.  Yield becomes attractive every bit a flying to safety, precisely yield is besides to a greater extent than attractive if rates are probable to remain lower for longer.

Tuesday, Jan 19th

*  Everyone wants to merchandise alongside confidence together with conviction, but that agency that nosotros get got to maintain heed together with torso inwards peak conditioning, especially during busy markets.

*  We traded to novel lows for this movement on Friday, precisely interestingly nosotros saw the start prove of divergences inwards the novel lows information for SPX stocks.  For example, nosotros had 129 to a greater extent than novel 100-day lows than novel highs on Friday, surprisingly curt of the 167 differential on Wednesday.  Only 8.96% of SPX stocks traded inwards a higher house their 10-day moving averages on Friday, precisely that was silent higher than Wednesday's degree of 4.98%.  (Data from Index Indicators).  Among SPX sectors failing to brand novel lows on Fri were XLU, XLE, together with XLV.  The relative forcefulness of the XLE shares is notable, given the recent weakness inwards oil.  We've bounced good off Friday's lows inwards vacation together with pre-market trade. 

*  Last week's trading notes observed prove that the electrical flow marketplace position downturn has been to a greater extent than persistent than recent corrections.  When we've had important declines inwards August, 2011 together with May, 2010, nosotros saw follow-through weakness fifty-fifty later a momentum depression was reached.  I am opened upwards to that possibility inwards the acquaint market.  If, however, nosotros get got indeed set inwards a momentum low, nosotros should consider to a greater extent than of a two-way merchandise going forrad than what we've seen thence far inwards 2016.

*  My intermediate term forcefulness measure, which takes into concern human relationship 5, 20, together with 100-day novel highs vs. lows amid SPX shares, opens the calendar week inwards unusually oversold territory.  With VIX closing inwards a higher house 25 on Friday, nosotros should decease on to consider meaningful volatility.

Info!! A Await At Stance As Well As Stock Marketplace Strength

As nosotros tin terminate see, the CBOE equity put/call ratio has averaged well-nigh .60 since the 4th quarter of 2009. We've tended to spike higher than average (showing relative bearishness) close intermediate-term depression points together with convey tended to register below average (showing relative bullishness) readings around intermediate-term peaks. That ratio has been largely below average for a piece now, indicating that traders stay relatively bullish next the market's ascent to fresh highs.

Although we're trading relatively close those bull highs, the release of stocks registering fresh 20-day highs vs. lows has remained subdued. As I noted inwards my recent tweet, nosotros saw 969 stocks across the NYSE, NASDAQ, together with ASE brand fresh 20-day highs on Tuesday together with 398 score novel lows. Earlier this month, nosotros had over 3000 novel 20-day highs.

That existence said, the recent travail has suggested to a greater extent than sector rotation than outright correction: of the twoscore stocks inwards my handbasket (five from 8 S&P sectors), fully 32 are trading inwards uptrends according to my Technical Strength measure. (That indicator is besides updated each morning time prior to the marketplace opened upwardly via Twitter). We're besides hovering close bull marketplace highs inwards the advance-decline business specific to NYSE mutual stocks, every bit noted past times Decision Point. While see could constrain the near-term upside here, we're non seeing the sort of technical deterioration that by together with large precedes major marketplace selloffs.
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Info!! The Importance Of Sector Correlations Inwards The Stock Market

Recent posts cause got taken a hold back at useful marketplace indicators, including buying together with selling pressure; pure volatility; unique measures of breadth; daily sentiment; together with intraday sentiment.  This post takes a hold back at the rolling 20-day correlations amid cardinal stock marketplace sectors.  What I exercise inwards this stair out is cause got 10 segments of the stock marketplace together with move pairwise correlations amid their ETFs.  The terminal stair out is the average of the entire correlation matrix.

Let's recollect most what that means.  Technical analysts usually hollo to "divergences" amid stocks at marketplace turning points.  That's 1 argue breadth measures are popular:  they position occasions inwards which stronger stocks are becoming differentiated from weaker ones.  When nosotros are making marketplace lows, stronger stocks neglect to follow the wide averages; when nosotros are making marketplace highs, weaker stocks neglect to confirm the forcefulness inwards the wide averages.  The correlations amid sectors furnish a way of quantifying this differentiation amid stocks.

If yous click on the nautical chart above, yous tin come across that correlations cause got been highest unopen to intermediate-term marketplace bottoms together with lowest unopen to intermediate cost peaks.  During "risk off" periods, correlations ascent considerably, equally selloffs hitting all sectors.  The initial liftoffs from marketplace bottoms abide by buying involvement from longer timeframe participants together with cause got most stocks off their lows.  As rallies age, weaker stocks start to lag together with correlations fall.

If nosotros teach dorsum to 2012 together with exercise a median dissever of the data, nosotros abide by that, when correlations are inwards the lowest one-half of their distribution, the adjacent 5 days inwards SPY cause got averaged a apartment performance.  When correlations are inwards the highest one-half of their distribution, the adjacent 5 days inwards SPY cause got averaged a well for yous gain of +.68%.  This blueprint of subnormal returns for depression correlation markets together with superior returns for high correlation markets extends to twenty days out.  Interestingly, correlations are at real depression levels inwards the electrical flow market, suggesting reduced upside potential.

So nosotros cause got all these measures that look to cause got usefulness inwards anticipating frontwards cost movement.  How exercise nosotros pose them together to exercise genuinely evidence-based marketplace indicators?  That volition move the dependent area of the adjacent post inwards this series.

Further Reading:  Intraday Sector Correlations
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Info!! Sector Update For September 7Th

What a difference a calendar week makes. The final sector update institute the bulk of sectors inward small-scale uptrends, amongst testify of sector rotation rather than strong upward trending. Over the by week, money has continued to menstruum out of stocks too most of our sectors stimulate got flipped from small-scale uptrends to small-scale downtrends. What this agency inward utilisation is that I'm viewing the marketplace through ii sets of lenses. One is the lens of the short-term trader, who is seeing the marketplace weaken from solar daytime to day, calendar week to week. (By Friday, for example, nosotros posted over 2400 fresh 20-day lows amidst NYSE, NASDAQ, too ASE issues; a total indicator review volition look tomorrow AM and, equally always, I volition travel updating the indicators prior to each trading solar daytime potentially meaning divergences betwixt the electrical current marketplace activeness too the weakness that nosotros saw at the July lows. In short, we're seeing more fearfulness too selling than inward the by few weeks, precisely fewer stocks are participating inward that selling than at recent marketplace lows.

So basically nosotros stimulate got ii scenarios: the kickoff is that we've begun a fresh leg downwards inward the marketplace too volition decisively accept out the July lows across the major indexes. The 2nd scenario--and, frankly, the 1 I'm leaning toward--is that the July through early on September weakness is business office of a bottoming process, amongst waning participation to the downside.

Here are the Technical Strength (trending) numbers for each of the 8 S&P 500 sectors that I follow, amongst the pct of stocks inside each sector trading higher upward their 50-day moving average (in parentheses):

MATERIALS: -80 (40%)
INDUSTRIAL: -200 (20%)
CONSUMER DISCRETIONARY: -100 (57%)
CONSUMER STAPLES: +40 (61%)
ENERGY: -460 (5%)
HEALTH CARE: -240 (30%)
FINANCIAL: +240 (64%)
TECHNOLOGY: -320 (19%)

We tin come across that the unloose energy too technology scientific discipline shares are dramatic underperformers, equally the marketplace is pricing inward the effects of slow/no increase inward the economy. Consumer staples stocks are outperforming equally defensive issues, but--interestingly--we're too seeing underperformance amidst wellness assist shares. That may reverberate renewed concerns nearly cost-cutting inward that expanse inward the wake of the Presidential election. Amazingly, fiscal shares are leading the pack; it volition travel interesting to come across how they response to the regime bailout of FNM too FRE.

Note how the percentages of stocks higher upward the 50-day moving averages is quite discrepant across sectors: in 1 lawsuit again, we're seeing enough of sector rotation. At this point, the percentages are non nigh levels ordinarily associated amongst intermediate-term marketplace bottoms, despite the fact that we're at fresh annual lows inward the NYSE Composite Index too nigh those lows inward the S&P 500 Index. This is however unopen to other reflection of the divergences I'm seeing inward the electrical current market. Either nosotros stimulate got much farther to larn on the downside, or the bulk of shares stimulate got set inward their lows for the electrical current comport cycle. I'll travel tracking the indicators closely to handicap the odds of these really dissimilar scenarios; remain tuned...
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Info!! Indicator Update For February 23Rd

Last week's indicator update establish sector as well as indicator weakness, simply stressed that nosotros were non at an oversold grade as well as remained inwards a wide, choppy trading range. With the interruption of the 800 grade inwards the S&P 500 Index early on inwards the week, nosotros moved below that attain as well as stayed below for the week. That brought the Cumulative Demand/Supply Index (top chart) into oversold territory, though non at that -30 grade that has marked recent intermediate-term marketplace bottoms. The weakness has been broad, extending across all sectors, suggesting that the acquit marketplace remains intact every bit long every bit nosotros rest below the prior, extended trading attain mentioned above.

Another indication of the breadth of the marketplace weakness is the expansion of stocks making fresh 20-day lows across the NYSE, NASDAQ, as well as ASE (middle chart). We are seeing fewer novel lows on a 52-week dry reason than nosotros saw slow inwards 2008, as well as non all sectors convey seen fresh acquit marketplace cost lows. Similarly, field nosotros were notably weak inwards Cumulative NYSE TICK this by calendar week (bottom chart), nosotros remain higher upward the Nov lows. The same is truthful for the advance-decline lines specific to NYSE mutual stocks as well as S&P 500 issues. These divergences would popular off much to a greater extent than of import inwards my estimation should nosotros sustain a broad rally that keeps the S&P 500 marketplace higher upward its violated back upward at that 800 level.

As I emphasized the concluding distich of weeks, the peaks inwards the Cumulative Demand/Supply index convey occurred at successively lower cost highs; each rally inwards this acquit marketplace has failed to surmount the 1 previous. As long every bit that is the case, as well as specially every bit long every bit we're seeing weakening Cumulative TICK as well as expanding novel lows, it is premature to live pounding the tabular array on the long side.

I convey posted the daily as well as weekly SPY target levels to Twitter (free subscription via RSS) as well as volition update the indicators each morning time prior to the marketplace open. The market's relative volume--how electrical flow book compares to the average book for that detail fourth dimension of day--is really helpful inwards gauging marketplace volatility as well as the odds of hitting these targets. The relative book norms for this week's S&P 500 e-mini marketplace look below:

8:30 - 234,993 (62,792)
9:00 - 199,589 (48,899)
9:30 - 152,938 (48,688)
10:00 - 136,174 (65,293)
10:30 - 117,904 (59,114)
11:00 - 104,818 (40,222)
11:30 - 90,351 (33,155)
12 due north - 110,937 (37,560)
12:30 - 121,941 (46,688)
1:00 - 125,444 (58,883)
1:30 - 140,481 (61,592)
2:00 - 175,042 (50,129)
2:30 - 230,477 (84,999)
3:00 (15 instant period) - 99,318 (25,438)

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