Info!! How To Read Marketplace Cycles

I detect it helpful to intend inwards terms of marketplace cycles, rather than trends.  H5N1 cycle consists of both trending together with non-trending components.  Understanding where we're at inwards cycles helps us seat whether nosotros desire to last going amongst forcefulness or weakness or whether nosotros desire to fade these.  Once nosotros intend inwards cycles, it's light-headed to seat ourselves equally tendency traders or counter-trend traders.  Our chore is to profits from the diverse phases of marketplace cycles, non essay out to brand marketplace action lucifer our predetermined trading preference.

Cycles are similar snowflakes:  no 2 are identical together with yet all accept a similar structure.  Let's review the phases of a marketplace cycle:

1)  Market Momentum Bottom - Here is where nosotros launder out on elevated volume, amongst a maximum release of stocks registering fresh novel lows.  Volatility is high together with correlation is high, equally the corking bulk of stocks together with sectors are participating inwards the decline.  An event of a marketplace momentum depression was Jan 20, 2016, when nosotros dropped on high book amongst over 2600 stocks across all exchanges registering fresh three-month lows.

2)  Market Bottoming - The extreme selling brings inwards value buyers together with nosotros larn a abrupt bounce from the marketplace lows, followed past times farther attempts at selling.  At major marketplace lows, this bottoming procedure tin laissez passer notice lead house over a stream of weeks or more; at intermediate lows, it may lead house over subsequent days.  An event of a bottoming procedure was the bounce into the showtime of February, 2016 followed past times a turn down to novel closing cost lows on Feb 11th.  Only 1353 stocks made fresh three-month lows at that time, showing that selling pressure level was having difficulty moving the corking bulk of shares lower.

3)  Bull Momentum Phase - With the inability of sellers to movement the bulk of stocks lower, value buyers render amongst a vengeance aided past times short-covering together with that moves the marketplace steadily higher.  Volume together with volatility are even together with then high, amongst the vast bulk of stocks lifted off their lows.  In this phase, nosotros oftentimes hold off for pullbacks simply larn none of corking magnitude, equally momentum enables forcefulness to follow from strength.  H5N1 proficient event of a momentum stage was the abrupt movement of stocks higher from mid-February, 2016 through much of March together with early on April.

4)  Bull Topping Phase - Here is where higher prices larn to the yell for where the marketplace is no longer attractive to value participants together with bulls are relatively loaded up.  This results inwards a drib of book together with relatively depression levels of volatility.  Correlations movement lower equally around sectors together with stocks drib dead on strong, spell others start out to lag.  Late inwards a topping phase, nosotros tin laissez passer notice run across the release of stocks making fresh short-term lows expand, fifty-fifty equally the overall marketplace averages are almost their highs.  H5N1 curt topping stage occurred from mid-April, 2016 through early on June.  Over that time, cost moved higher, simply novel three-month highs dropped from 1113 to 818.

5)  Bear Momentum Phase - The inability of buyers to force the marketplace to novel highs attracts the participation of sellers together with book together with volatility 1 time once to a greater extent than selection up.  The marketplace tin laissez passer notice stay oversold for a while, equally bulls larn out their positions together with shorts are emboldened.  Correlations rise, together with nosotros movement toward a marketplace momentum bottom.  The marketplace demonstrated an intermediate deport momentum stage from early on June, 2016 to belatedly June.  At that bottom, nosotros did non run across an elaborated bottoming process.  When a pullback occurred, it was from a higher cost yell for together with resulted inwards a higher cost low.  This led to a quick rally higher into August.

As a rule, the longer the deport marketplace stage together with bottoming processes, the longer the subsequent rally.  The longer the bull topping phase, the to a greater extent than extreme the subsequent deport phase.  When to a greater extent than marketplace participants are trapped curt or long, the unwinds tend to last greater.

Cycle construction tin laissez passer notice render us amongst a route map for gauging where nosotros stand upwards amongst honor to "overbought" together with "oversold" markets together with the likelihood that forcefulness or weakness volition drib dead on or reverse.  I purpose cycles less for predicting markets than agreement them.  Knowing where we're at inwards a marketplace cycle helps us avoid chasing markets at the incorrect fourth dimension together with likewise helps us avoid standing aside during the market's periods of momentum.  Most of the indicators I rail are ways of gauging 24-hour interval to 24-hour interval forcefulness together with weakness together with updating where nosotros stand upwards inwards terms of cycle structure.

At present, nosotros run across book together with volatility at relatively depression levels together with small-scale cap shares underperforming large caps.  That has contributed to a ascent inwards the release of stocks registering fresh short-term lows.  For example, on Mon nosotros had 520 stocks across all exchanges brand novel monthly highs, simply 694 register fresh monthly lows.  Technology shares accept made novel highs, simply many sectors stay below their peaks.  All of that raises the odds that we're at a relatively late, topping stream inwards the recent bull cycle.

Further Reading:  Relative Volume together with Links to the Indicators I Follow
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Info!! An Introduction To Trading: Stock Marketplace Pose Cycles Across Timeframes

this link for all prior segments), we'll examine examples of the aperiodic stock marketplace cycles that bird the commencement leg of our conceptual framework. Readers are strongly advised to read this prior percentage of the book before going forward, hence that they volition empathize the basic concepts behind bike structure.

First let's stimulate got a expression at a long fourth dimension frame (top chart). We made a momentum high inward the Dow Jones Industrial Average (DJIA) inward October, 1965 when nosotros saw 160 stocks (out of the roughly 1400 that traded at that time) brand fresh 52-week highs. That momentum high represented the indicate of maximum upside momentum from the long-term bull marketplace that sprang from the momentum lows of the early on 1930s all the style to the secondary lows of the belatedly 1940s. From the momentum high inward 1965, nosotros made subsequent cost highs inward 1966, 1968, in addition to 1972 before the marketplace plunged to momentum lows inward 1974 in addition to eventual secondary lows inward 1982. The entire sequence of a momentum high inward 1966; secondary high inward 1972; momentum depression inward 1974; in addition to secondary depression inward 1982 represents a unmarried cyclical structure.

Now let's drill downwards a fleck (bottom chart). From the Dow lows inward March/April, 1980, nosotros marched higher to a momentum high inward November, 1980 in addition to secondary highs inward March, 1981. We in addition to then dropped to a momentum depression inward September, 1981 in addition to secondary lows inward March, June, in addition to August, 1982. That sequence of a momentum high inward November, 1980; secondary highs inward March, 1981; momentum depression inward September, 1981; in addition to secondary lows inward summer, 1982 represents some other cyclical structure--one nested inside the bike described inward the before paragraph.

These are historical examples that I pulled from my database, using archived information for advancing vs. declining stocks in addition to stocks making novel 52-week highs in addition to lows. Let's stimulate got a expression at several of import implications of this cyclical structure:

1) The shape of a bike is partly determined past times the cyclical structures inside which it is embedded. If we're inward a long-term downward stage of a cycle, the downward stage of an embedded shorter-term bike volition live on exaggerated. During longer-term periods of topping in addition to bottoming, we'll run into shorter-term cycles that are to a greater extent than symmetrical inward the aAmplitude of their rises in addition to declines.

2) There is a petroleum proportionality betwixt the duration of the motion from a momentum high to secondary cost lows in addition to the duration of the side past times side bull marketplace rise. Thus, nosotros had a momentum elevation inward 1965 in addition to a final, secondary depression inward 1982; that led us to an of import long-term bull marketplace momentum elevation inward 1999. Similarly, nosotros hitting a momentum elevation inward belatedly 1980 in addition to secondary lows inward March-August, 1982; that led us to an of import cyclical bull elevation inward early on 1984. This petroleum proportionality, commencement pose out (to my knowledge) past times Terry Laundry, is non precise to the 24-hour interval or week, but is a helpful guideline for wide investment timing.

3) One's trading strategy should live on adjusted for the stage of the marketplace bike existence traded. As markets are gaining momentum, a trend-following strategy (buying dips inward an uptrend; selling bounces inward a downtrend) volition live on nigh successful. Once nosotros stimulate got passed a momentum peak, countertrend trading (fading push clit when buying dries up; fading weakness when selling dries up) volition live on nigh successful. Price lone is non sufficient equally a dry reason for trading decisions: you lot stimulate got to know whether markets are gaining or losing participation equally prices motion to novel highs or lows.

4) No cyclical structures are perfect. Secondary highs in addition to lows are oftentimes fresh cost highs in addition to lows, but non always. Take the instance of October, 1987--a dramatic momentum depression on panic selling. That drib left a huge cost tail intraday that was never taken out during the secondary cost lows that occurred inward 1988. Similarly, non all indexes volition brand fresh cost highs at secondary highs: it's exactly such divergences that assist us position secondary highs.

5) Note, too, that at that topographic point tin ship away live on multiple secondary highs or lows. As a rule, I've works life that the longer the duration of the distribution procedure (the fourth dimension betwixt momentum highs (lows) in addition to secondary highs (lows), the greater the trending motion next the distribution. Some of the best bull markets, for example, stimulate got followed declines inward which nosotros had clearly defined secondary lows good spaced apart (see the lows of 1982, belatedly 1990; belatedly 1998); some of the best comport marketplace stimulate got followed rises inward which at that topographic point was an extended menses of topping (the highs of 1999-2001). In general, markets stimulate got longer to top than to bottom.

6) Different information are helpful inward distinguishing momentum in addition to secondary extremes for cycles at dissimilar fourth dimension frames. Weekly information are helpful (advance/decline, novel highs/lows, oscillators) for longer-term cycles; daily information for intermediate-term cycles; in addition to intraday information for short-term cycles. I role rattling short-term data, such equally NYSE TICK in addition to Market Delta for short-term cyclical moves; end-of-day information to uncovering divergences for intermediate-term moves.

It takes a fair amount of fourth dimension studying short, intermediate, in addition to long-term cycles to overstep sensitive to their variations in addition to nestings. This is non a mystical numerical arrangement in addition to investors/traders who endeavour to utilise this for precise timing volition live on disappointed. Rather, we're constructing a conceptual arrangement that tells us 2 things: 1) how the electrical current fourth dimension frame relates to the side past times side larger one; in addition to 2) how the market's gaining in addition to losing of push clit in addition to weakness is related to expectable cost activity going forward.

In my side past times side post, we'll stimulate got a few examples closer to our electrical current fourth dimension period.
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Trick The Anointed Ones Too The Bearish Divergence

I'm certainly most of y'all create got seen these anointed ones all over social media in addition to stock marketplace pose groups. The funny affair nigh these guys is how much they dear to survive right...

... fifty-fifty when the marketplace pose tells them otherwise.

So allow me get-go enlighten y'all to a real powerful prophetic indicator that alone a few somebody men use. 

The Bearish Divergence

A bearish departure appears when the cost makes a higher high but the RSI forms a lower high. Simple right? If y'all desire it inwards to a greater extent than simpler terms, it could survive that most people are bullish on a stock but the cost isn't going anywhere in addition to all of a precipitous 1 day, decides to driblet - which confirms the divergence. 

Now allow me bring y'all to simply about other session of appreciating renaissance fine art piece agreement persuasion cycles. Let's begin!

When a monster rally starts on a stock, people plainly bring notice. Anointed ones would in addition to hence claim how beautiful this fellowship is based on their marketplace pose experience. So they urge the novel bloods to read on the company.

Obviously this would atomic number 82 into a lot of discussion. Some would endeavor to refute in addition to warn but ultimately drown every bit things plough when gurus would in addition to hence claim victory over favorable cost actions amplified past times the voices of their cult following.

At simply about point, many would net turn a profit from the run. And simply about would unremarkably portion how lovely their experiences were in addition to how glad they listened. Their "work" would in addition to hence survive used every bit gospel to the unbelievers.

"See? Bagger na kami! (Actually non all the same for me, but) Be tranquillity in addition to simply sit down tight!" 

But of class non everyone would profit. And when things plough a picayune sour in addition to a few start to doubt, the anointed ones in addition to their cult would in addition to hence start speeches that contradict in addition to confuse - ultimately to create got the follower confident of his or her position... to survive confidently confused.

We all know where this is headed right? But non a lot would bring the market's truth. 

When y'all run across this statement, it actually agency "I don't know what this contestation agency but I'll say it anyway hence I'll await smart."

This cruel bicycle is real prevalent when y'all run across anointed ones hither in addition to at that topographic point hype the certainly stock non halt fifty-fifty during consolidations in addition to obvious cost dumps.

When a bearish departure confirms in addition to materializes the bear, that's when things instruct nasty. So if I were you, I'd survive taking what I create got fifty-fifty if it is at a loss in addition to don't await back.

Click hither to read a previous like post.

Info!! An Introduction To Trading: The Market's Auction Process

[Note: This is the latest installment inwards the costless e-book that I am assembling 1 post service at a time. By the destination of this process, the goal is to stimulate got an introductory guide to trading theory together with technique that tin forcefulness out acquire novel traders started on their learning curves without the inconvenience together with high cost associated with many educational efforts. The amount contents of the majority can survive works life here].

Market mastery requires to a greater extent than than a computer, mouse, online connection, together with uncomplicated setup patterns to trade. If trading is to survive pursued equally a career, it is of import to empathise how together with why markets move. Such an agreement enables traders to recognize together with suit to shifting marketplace position conditions; it also helps them know when to select adventure together with when to save capital.

The kickoff chemical cistron inwards a conceptual framework for traders that we've covered inwards this majority is the notion of non-periodic cyclical movements. Equity markets tend to non become upwardly or downwards inwards a straight off line. Rather, trending movements are punctuated past times periods of transition inwards which to a greater extent than or less sectors driblet dead on trending, spell others autumn into a gain or fifty-fifty reverse. These periods of trending together with transition occur across multiple fourth dimension frames, such that a tendency at a brusk fourth dimension frame may survive embedded inside a transitional stage at a larger one.

This thought of cyclical motility tells us most the shape together with construction of marketplace position movement, only doesn't explicate *why* this motility occurs. For such an explanation, nosotros must plow to a 2nd facet of our conceptual structure: the marketplace position equally an auction process.

Let's laid out with a really uncomplicated example: imagine that doc Brett is selling his latest majority on e-Bay. He offers the majority for sale at $36.00, a 20% discount from the $45.00 listing price. He has 100 books to sell, together with the kickoff few are snapped upwardly at the offering price, the $36.00. These readers are highly motivated to read the book, together with thence they are willing to pay the offering cost (a.k.a., "lift the offer") inwards club to ensure their copy.

If the orders are coming inwards fast together with furious, doc Brett could heighten the cost to $40.00 together with select payoff of the motivation of the buyers. Some buyers would survive willing to pay this price; a nautical chart of the book's cost motility would demo an upward trend.

The $40 cost is non equally attractive equally the initial $36 cost and, eventually, buying orders tedious down. For a while, the cost stays at $40 with relatively few orders. The marketplace position is finding reduced need at $40; participation inwards the buying procedure is waning. In marketplace position terms, the buying is "drying up".

Seeing this drying upwardly of price, customers laid out bidding $36 for the book, figuring that they tin forcefulness out campaign a create produce for themselves. If doc Brett is motivated to displace the inventory, he may good select the bid together with sell books at the original listing price. The fact that he is willing to "hit the bid" of the client shows that the seller is at nowadays to a greater extent than motivated to brand the transactions. H5N1 few aggressive buyers create upwardly one's heed to bid entirely $32 for the majority together with doc Brett hits their bids equally well. This motivates other buyers who at nowadays come across that the majority is selling for a pregnant discount, together with the bids come upwardly in. The marketplace position for the majority is at nowadays inwards a downward trend, equally lower prices select increased involvement (volume). Eventually, buyers volition probe prices that are likewise depression for doc Brett together with his publisher, together with they volition reject to striking those bids. At that point, the selling motivation is "drying up" together with less majority is transacted.

Over time, exogenous events volition impact the marketplace position for the book. When a convention comes to town featuring a presentation on trading psychology, need for the majority may increment together with prices volition reverberate the buyers' willingness to pay what sellers are offering. When markets calm down, traders sustain less involvement inwards psychology together with need for the majority tails off. In that scenario, prices volition reverberate the sellers' willingness to displace the inventory.

This is a highly simplified example, only it illustrates an of import principle: auctions select together sellers, who are motivated to business office with their goods at an offering price, together with buyers, who are motivated to obtain the goods at their bid price. Where transactions occur inside the bid-offer matrix reflects the moment-to-moment shifts of persuasion alongside buyers together with sellers. It is the transitioning of buyer together with seller involvement at primal cost levels that creates the transitional structures noted inwards our news of marketplace position cycles.

Our side past times side pace volition survive to extend this auction model to multiple timeframes, together with thence that nosotros tin forcefulness out come across how auctions proceed alongside dissimilar classes of marketplace position participants. In our side past times side post service inwards the series, nosotros volition come across that, what nosotros telephone band a market, is truly many markets comprised of dissimilar participants with dissimilar expectations together with fourth dimension horizons. The interplay of these participants creates the patterns that recur across markets, from intraday to really long term.

*******

Note: An first-class introduction of auction theory is Jim Dalton's "Mind Over Markets" together with his followup majority "Markets inwards Profile". Jim together with colleague Terry Liberman offering preparation together with instruction inwards auction-based trading via their site, where the books are also offered for sale. Bill Duryea conducts an online trading room based on auction marketplace position principles; come across the Institute for Auction Market Theory site.
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Info!! Using Pure Cost Momentum To Rails Marketplace Cycles

I'm non a big fan of price similar "overbought" in addition to "oversold".  Too often, those price embed a bias--that the stretched marketplace is probable to snap back.  Similarly, i mortal looks at a nautical chart in addition to notices "consolidation"; to a greater extent than or less other perceived "topping".  There is a lot of room for subjectivity inwards how nosotros label what nosotros see.  That's a practiced argue to hold off at many things alongside a fresh ready of eyes.  We're less probable to autumn victim to confirmation biases if nosotros persuasion the globe through multiple lenses in addition to invite data that doesn't neatly tally into our views of the moment.

Above is a nautical chart of the ES futures.  Each indicate on the nautical chart represents 50,000 contracts traded.  On busy days, nosotros impress to a greater extent than points on the chart; boring days impress fewer.  Similarly, the busy times of twenty-four hours impress to a greater extent than points than the slow, midday hours.  This normalizes, to to a greater extent than or less degree, volatility inside in addition to across days.  I farther require keep volatility out of the motion painting past times only recording whether the average cost of each book bar is upward or downward relative to the prior bar.  The nautical chart is an 80-bar moving average of this up/down count.  It tin last viewed equally a relatively pure stair out of cost momentum.

When the 80-period average has been inwards the transcend one-half of its distribution, the adjacent twoscore bars require keep averaged a gain of +.15%.  When the average has been inwards the bottom one-half of its distribution, the adjacent twoscore bars require keep averaged a loss of -.01%.  If you lot hold off at the nautical chart closely, you'll run into the argue for this momentum effect:  early on inwards a marketplace cycle, nosotros run into a surge inwards upside momentum, which stays positive but wanes equally the cycle matures.  Eventually nosotros give-up the ghost negative momentum, leading to a crescendo of downside cost modify soon earlier nosotros hitting a cost low.

Seeing where we're at inwards this procedure gives a practiced read for where nosotros stand upward inwards the acquaint marketplace cycle.  Much of the upside drive inwards the marketplace tin last attributed to momentum next rigid positive readings in addition to value/reversal next rigid negative readings.  Tracking these helps us suit to the phases of a marketplace cycle.

Further Reading:  Finding Opportunity inwards Market Cycles
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Info!! Trading Notes: Calendar Week Of October 5Th

Friday, Oct 9th

*  Morning selling push clit per unit of measurement area yesterday could non breach overnight as well as prior 24-hour interval lows, continuing the apartment correction.  In general, when overnight as well as prior 24-hour interval lows/highs concur on early on 24-hour interval selling/buying, it's worth thinking nearly buying the dip/selling the bounce to exploit the potential designing of higher lows/lower highs.  With the Fed minutes, pregnant buying flows ane time over again returned to stocks as well as nosotros over again made novel highs for this move, alongside an expansion inwards the lay out of shares registering fresh highs.  H5N1 total of 242 SPX stocks registered fresh 20-day highs vs. lows, the highest since August 17th (raw information from Index Indicators).  As emphasized yesterday, I'm non seeing the kinds of divergences that would ordinarily precede a substantial correction. We're ane time over again stretched on a multi-day basis, as well as therefore that leaves me inwards the style of buying pullbacks.

*  Earlier entries mentioned the real strong buying push clit per unit of measurement area during this rise.  On a five-day basis, we've seen buying forcefulness that has alone been introduce on nine prior occasions since 2012.  Ten days later, SPX was upward 8 times, downward ane time for an average gain of nearly +3.0%.  Once again, this highlights the momentum upshot ane time institutions dominate on the buying side.

*  Volatility continues to decline, alongside VIX straight off below 18.  If this is similar past times strong buying cycles, nosotros volition run into pocket-size pullbacks as well as farther grind higher on lower volatility until breadth divergences stimulate to appear. 

Thursday, Oct 8th

*  Buying dips indeed proved to move a useful strategy inwards Wednesday's session, equally nosotros closed ane time over again alongside strength.  Across all exchanges, nosotros saw over G stocks register fresh monthly highs, a novel high for this upleg.  In full general I don't decease overly concerned nearly sustained downmoves unless nosotros run into a preceding menses of fourth dimension inwards which fewer stocks participate inwards the strength.  Thus far, the participation has been solid, alongside the buying push clit per unit of measurement area mentioned yesterday continuing strong.  We're quite extended inwards the curt run, as well as therefore the consolidation we're seeing inwards overnight trading is non unusual.  My leaning is to permit this consolidation to run its course of report earlier resuming long positions.  Even inwards salubrious uptrends, it's non odd to acquire a pullback inwards which the bulk of shares merchandise below their iii as well as 5-day moving averages.  I'd facial expression at such a pullback equally a potential buying opportunity; I'd likewise move interested inwards buying whatever flattish correction that stays higher upward the 1960-ish level.

*  Note that VIX continues lower as well as continues to remain below 20.  I proceed to take away heed people lay the comport thesis out there, but the marketplace is but non trading that agency at present.  I believe investors run into the global weakness out at that topographic point as well as are already buying stocks inwards anticipation of farther easing from cardinal banks.  Traders who hold back for the actual cardinal banking concern announcements earlier buying may move making a mistake.  With Friday's weak jobs lay out inwards the U.S., an accomodative monetary policy across the the world was pretty good ensured.  Markets are forrad looking.

*  Below you lot tin run into a short-term charge per unit of measurement of alter indicator (red) plotted vs. ES futures (10/2/15 to the present), where each bar represents 500 cost changes inwards the index.  This normalizes for activeness during wearisome periods, such equally overnight.  I similar the perspective equally a short-term overbought/oversold measure.  In general, I similar buying oversold levels when we're making higher lows as well as higher highs as well as vice versa.  I similar taking profits when nosotros acquire overbought/oversold as well as can't brand novel highs/lows.

Wednesday, Oct 7th

*  We did indeed acquire the consolidation noted inwards yesterday's postal service and, as well as therefore far, we're seeing some belongings of the consolidation as well as buying of the dip inwards overnight trading.  I'm watching to run into if nosotros tin concur those overnight lows, alongside a leaning toward buying weakness that holds higher upward ES 1960.  My short-term models remain modestly bearish, however, as well as therefore I'm opened upward to the possibility of farther consolidation.

*  Readers volition retrieve that I interruption the uptick/downtick statistics into split upward measures of buying push clit per unit of measurement area as well as selling pressure.  The buying push clit per unit of measurement area has been real strong over the past times v trading sessions.  Returns 3-5 days out conduct hold been choppy, alongside picayune edge, but 10 days out nosotros run into fifteen occasions up, 2 downward for an average gain of over 2%.  We'll ask to run into distinct selling push clit per unit of measurement area to entertain a provide to a bearish regime; we'd likewise ask to run into VIX top 20.

*  Put/call ratios conduct hold come upward downward quite a chip from the recent marketplace lows.  That's some other argue I wouldn't move surprised past times sloppy trading nigh term.  I likewise banker's complaint the upside breakouts inwards emerging marketplace currencies (CEW) as well as commodities (DBC); both are reversals of the previous bearishness unopen to China.

Tuesday, Oct 6th

*  Great summary of my recent podcast alongside Better System Trader from The Waiter's Pad; thanks, Mike!

*  We saw real proficient follow through to Friday's strength, equally the volatility addition the buying flows (volume-weighted NYSE TICK) created pregnant upside momentum.  We saw 780 stocks across all exchanges brand fresh one-month highs against 143 novel lows.  We've come upward off a chip overnight as well as my models are moderately bearish over a 3-5 24-hour interval horizon, as well as therefore some consolidation is to move expected.  My sense, however, is that many traders conduct hold missed this rally as well as volition move interested inwards buying dips, which could maintain consolidations modest--as much inwards fourth dimension equally inwards price.

*  Another argue I facial expression some consolidation is that we're quite stretched on a short-term basis, alongside over  90% of SPX shares trading higher upward their 3, 5, as well as 10-day moving averages.  When we've had a moderate VIX nether those circumstances (between fifteen as well as 25; due north = 12 going dorsum to 2006), the side past times side 24-hour interval has been upward iii times, downward nine for an average loss of -.12%.  Indeed, 10 of the 12 occasions posted a lower unopen over the side past times side ii trading days.  That beingness said, the side past times side 10 days conduct hold been 8 up, four downward for an average gain of +.37%, alongside 10 of the 12 occasions posting a higher unopen inside v trading days.  So non much border inwards general, though my base of operations instance is to run into consolidation inwards the side past times side 24-hour interval or ii that is worth buying into.

*  I mentioned yesterday that I'm keeping an optic on VIX.  We're below twenty for the kickoff fourth dimension inwards a while; if whatever consolidation does occur inwards a flattish fashion, reducing realized volatility, that would advise a provide to the onetime volatility government as well as would move bullish overall for stocks.

Monday, Oct 5th

*  In my Forbes blog, I review ane of the best marketplace books I've read inwards a long time.  It's a detailed handling of high yield markets as well as a peachy reminder of how nosotros tin larn a peachy bargain nearly the markets nosotros merchandise past times studying as well as agreement related markets.

*  Fri was a 24-hour interval worth studying inwards detail.  We had a weak payrolls lay out as well as stock futures sold off hard.  We opened alongside selling on the day, equally NYSE TICK hitting several quite negative figures, but cost stopped going lower as well as the downticks began making higher lows.  This emboldened buyers to come upward in, upticks swamped downticks, as well as nosotros injure upward alongside a real strong 24-hour interval to the upside.  That forcefulness has continued into overnight trading, equally it indeed appears that nosotros conduct hold successfully tested the downside.  The oversold intermediate-term indicators that I referenced final calendar week volition non hitting overbought levels for a spell as well as volatility appears to move at the bull's back, as well as therefore I facial expression an surroundings inwards which pullbacks volition move bought.

*  I volition move watching VIX closely here.  One thought I'm playing alongside is that we've entered a higher volatility regime, much equally what happened inwards 2007 prior to the 2008 comport market.  VIX mostly bottoms ahead of stock marketplace highs and, inwards the electrical flow environment, that wouldn't surprise me.  That 2007 menses was a rangy topping marketplace alongside proficient swings due to the higher volatility.