Info!! Midday Briefing For November 19Th: Bearish Sentiment

As regular readers know, the NYSE TICK is 1 of my favorite measures of short-term stock marketplace sentiment. Here nosotros encounter TICK on a 3-minute basis; banking concern notation how the bars largely rest below the horizontal nil (purple) line. Influenza A virus subtype H5N1 quick await at the distribution of TICK values is afforded past times the moving average of TICK (blue line), which has stayed below nil through the session, exactly has of late firmed.

As a rule, values inwards a higher house +800 advise pregnant buying sentiment--many stocks upticking simultaneously, a sign of plan buying--and values below -800 demo pregnant selling sentiment. In today's merchandise therefore far, we've had no readings inwards a higher house +800, exactly quite a few below -800. That's a certain sign that institutions--those executing the plan trades--have been strongly leaning to the sell side.
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Info!! What The Cumulative Adjusted Nyse Tick Trouble Is Telling Us

this post for calculation of the adjusted TICK). As nosotros plunged to intraday lows on Oct 10th, nosotros made a depression inwards the cumulative TICK line; equally we've directly moved dorsum to those lows, the line has held at much higher levels inwards a dramatic divergence. What gives?

The TICK is a mensurate of stocks trading on upticks versus downticks. It begins its calculations amongst the showtime of trading inwards NY together with ends when the NYSE closes. As a result, the TICK does non line concern human relationship for activity that occurs overnight, betwixt the USA marketplace unopen together with the side past times side day's open.
If nosotros lead maintain a await at the S&P 500 Index (SPY) from the showtime of September, nosotros abide by that the marketplace lost almost 42 SPY points (approximately 420 ES points). From the showtime of September upwards to that Oct tenth inflection betoken at which the position out of stocks making novel lows hitting its highest grade (see chart), SPY lost 3.29 points betwixt the NY unopen together with the side past times side day's opened upwards together with lost 34.8 points betwixt the NY opened upwards together with close. From Oct tenth forward, SPY has lost 8.46 points during overnight merchandise and, during the 24-hour interval session, has genuinely gained 4.8 points.

The cumulative TICK is capturing the fact that buying trace per unit of measurement area has been exceeding selling trace per unit of measurement area during the 24-hour interval trading sessions from Oct tenth to the present. Indeed, during that time, the S&P 500 Index--if nosotros await at 24-hour interval session only-- has risen inwards value. This is a clear shift inwards authorities together with suggests that weakness inwards equity markets from Oct tenth frontwards has shifted to the European together with Asian markets. That weakness prompts the USA marketplace to opened upwards lower, but has non led to farther internet selling initiated inwards the U.S.

This morning, equally of my writing, we're seeing a potential repeat of this same pattern. Markets were real weak inwards Asia, opened quite weak inwards Europe, together with are trading lower inwards preopening trading inwards the USA stock index futures. We made novel comport marketplace lows overnight inwards the ES futures but, equally I write, are trading most 1.5% inwards a higher house those lows. Should nosotros create value during the regular trading 24-hour interval inwards a higher house these lows, I volition hold upwards leaning to the long side inwards my short-term trading, entertaining the hypothesis that, inwards this alter of regime, the 24-hour interval markets inwards the USA lead maintain already seen their cost lows, fifty-fifty equally markets overall (due to overseas/overnight influence) have been weak.

What prompted this petty investigation was a elementary observation that a growing percentage of my intraday trading profits was coming from the long side, despite the overall weak market. That makes sense, given that many of my trades drive to capture swings inwards the NYSE TICK (i.e., essay out to follow short-term buying/selling sentiment). I volition popular off on to follow these swings inwards early on activity today, amongst a detail pump toward whether nosotros sustain a positively or negatively sloped cumulative TICK line on the day. That volition enjoin us whether USA traders during the 24-hour interval session are using overseas/overnight selling for create out hunting, or whether they are succumbing to the global marketplace weakness.

P.S. - On a related note, Cumulative TICK together with Short-Term Sentiment

Trading With the TICK

Trading Breakouts With TICK
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Info!! A Multifaceted Reckon Of Intraday Sentiment

Among the short-term persuasion indicators that I detect virtually useful are the NYSE TICK (the running ease betwixt stocks trading on upticks vs. downticks) as well as Market Delta (the relative ease betwixt book transacted at the offering cost vs. the bid price).

Today's merchandise was an event of an occasion when these 2 measures gave somewhat dissimilar signals. Volume transacted at the offering vs. bid for the ES futures had a real little bearish cast inwards midday merchandise every bit the S&P 500 Index churned inwards a range, merely significantly to a greater extent than stocks were trading on upticks than downticks (positive TICK).

The argue for this disparity, every bit I noted inwards the Twitter posts, was that buying was significantly stronger inwards the wide market--particularly the little as well as midcap stocks--than inwards the large cap S&P 500 names. While traders striking bids inwards the ES futures, inwards business office reflecting early on consolidation alongside the fiscal stocks, cyberspace buying involvement sustained the rally inwards the Russell 2000 shares.

Only in 1 trial nosotros saw cyberspace book transacted at the offering inwards the ES *and* rigid buying involvement inwards the TICK after inwards the solar daytime did all the markets motility to novel highs inwards tandem, completing an uptrend day.

A multifaceted regard of sentiment, inwards which nosotros hold back at the persuasion specific to a unmarried index (such every bit ES) as well as the persuasion across the wide market, tin endure helpful to traders inwards teasing out when markets are prepared to motility inwards sync as well as when they are not. I notice that the novel version of Market Delta can display cumulative NYSE TICK as well as cumulative Market Delta--even a price-weighted version that approximates coin flow--on the same screen. This strikes me every bit a valuable means for traders to obtain a well-rounded regard of 2d to 2d sentiment, all at a unmarried glance.

I volition endure farther investigating the human relationship betwixt these 2 indicators as well as how traders mightiness create goodness from the information.
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Info!! Standard Buying As Well As Selling Ability Inwards The Stock Market

Recent posts convey focused on improved versions of criterion marketplace indicators, including sentiment, Bollinger Bands, VWAP, in addition to ticks.  One of my nigh challenging projects, however, has focused on the creation of measures of buying in addition to selling pressure level inwards the stock market.  My finish inwards creating this stair out was to follow an intuition in addition to process provide in addition to postulate every bit separate, independent dimensions, rather than a unmarried blended measure.  

My alpha version of this stair out disaggregates 2d to 2d upticks in addition to downticks across the wide listing of NYSE stocks.  Unlike the criterion NYSE TICK, which monitors upticks minus downticks across stocks, the novel indicator measures upticking in addition to downticking separately on a high-frequency soil in addition to hence assembles them into measures of buying in addition to selling interest.  From 2012 to the present, the resulting stair out of Buying Power correlates alongside Selling Power past times -.22.  In other words, less than 5% of Buying Power tin sack last explained past times Selling Power in addition to vice versa.

This is of import because it suggests that buyers in addition to sellers are dissimilar entities, behaving relatively independently.  We tin sack convey days inwards which buyers in addition to sellers are both active; days inwards which buyers are active in addition to sellers are not; days inwards which sellers are active in addition to buyers are not; in addition to days inwards which both buyers in addition to sellers are inactive.  This differentiation opens the door to unique analyses, inwards which direction in addition to volatility tin sack last tracked every bit a business office of the interplay betwixt buyers in addition to sellers.  

For example, the marketplace mightiness movement to novel highs because of a surplus of Buying Power or because of an unusually depression grade of Selling Power.  Those scenarios convey led to dissimilar toll paths over the nigh term.  When nosotros made a toll high inwards the latter component division of July, Selling Power was really low, merely Buying Power was besides good off its peak.  The marketplace held up, non because buyers were aggressive, merely because sellers were on the sidelines. 

Here's unopen to other interesting observation:  Since 2012, when Selling Power has been inwards the travel past times one-half of its distribution (high levels of selling pressure) over a four-day period, the side past times side 4 days inwards SPY convey averaged a gain of .45%.  When Selling Power has been inwards the bottom one-half of its distribution (low levels of sellers) over a four-day period, the side past times side 4 days inwards SPY convey averaged a gain of solely .04%.

Also since 2012, when Buying Power has been inwards the travel past times quartile of its distribution (high levels of buying pressure) over a four-day period, the side past times side 4 days inwards SPY convey averaged a gain of .43%.  All other occasions averaged a gain of solely .18%.

Together, these findings invite the hypothesis that stock marketplace forcefulness tin sack last attributed to ii factors:  momentum effects from high levels of buying in addition to value/mean reversion effects from high levels of selling (capitulation).  By independently parsing Buying in addition to Selling Power, it may last possible to ameliorate anticipate momentum in addition to reversal inwards the market.

Of course, much to a greater extent than investigation remains, specially over longer periods of marketplace history.  There are besides interesting questions that stay to last addressed, such every bit Buying in addition to Selling Pressure measures for other indexes in addition to for private stocks in addition to ETFs.  

My initial travel inwards this surface area suggests that it is fertile terra firma for the evolution of novel in addition to valuable marketplace measures.  For instance, during the recent marketplace decline, Selling Pressure hitting a peak several days earlier nosotros hitting the ultimate depression toll inwards SPY; that is besides when Buying Pressure bottomed.  Price continued to brand novel lows, merely the dynamics were already shifting away from Selling in addition to toward Buying.  With the marketplace bounce on August 8th, Buying Power absolutely swamped Selling Power in addition to the weather condition were laid for momentum continuation.

I volition last updating this research--and its application--in time to come posts.  It's a non bad representative of how 1 of the best strategies for adapting to changing markets is to arrange quicker.

Further Reading:  When is There Significant Buying in addition to Selling inwards Stocks?
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Info!! Identifying The Nyse Tick Environs In Addition To Stock Marketplace Sentiment

Recent posts convey focused on TICK equally a agency of gauging intraday buying together with selling sentiment.

A quick together with muddy agency of assessing buying together with selling pressure level is to regard positive together with negative TICK readings equally assort distributions. Count the publish of one-minute readings that overstep +800 together with count the publish that autumn below -800.

For TICK to read to a greater extent than than +800 or less than -800, institutions convey to live on executing baskets of stocks that volition either uptick or downtick simultaneously. Comparing the publish of +800 together with -800 readings gives a fossil oil thought of whether institutions are leaning to the buying or selling sides.

(Why addition or minus 800 equally the figure? That roughly corresponds to a "significant" TICK reading: to a greater extent than or less 2 measure deviations to a higher house or below the median reading).

In environments inwards which nosotros convey rattling few +800 or -800 readings, nosotros tin flaming infer that institutions are non active on either the purchase or sell side. Those are oft attain markets. That is the representative together with therefore far inwards today's merchandise (though buying persuasion is overall ahead of selling, amongst several near- 800 readings).

In environments inwards which nosotros convey many to a greater extent than +800 than -800 readings, nosotros tin flaming infer an upside trending market. Influenza A virus subtype H5N1 downtrending marketplace is 1 inwards which the -800 readings handily overstep those that are +800.

And how close environments inwards which nosotros encounter many +800 *and* many -800 readings. Those "two sided markets" are oft ones inwards which algorithmic/program trading is active, running markets upwards together with down. They oft are attain markets, only volatile, choppy ones.

Knowing the TICK surroundings you're inwards tin flaming live on rattling helpful inwards framing how y'all desire to live on trading, equally it enables y'all to align yourself amongst the persuasion of large traders that movement markets.
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Info!! Indicator Update For March 10Th

This volition update my recent post on the marketplace indicators too approximately of the conclusions from that review. Blogger is non allowing me to post charts, too thus delight excuse their absence.

* New Highs/Lows - Fri nosotros saw levels of novel lows consistent with recent momentum lows inwards markets. There were 224 novel 20-day highs against 3150 novel lows. We too saw 97 novel 65-day highs across the NYSE, NASDAQ, too ASE, against 1225 novel lows. This represents pregnant weakness, but too thus far remains below the orbit of novel lows registered inwards January. Similarly, if nosotros only hold off at the mutual stocks traded on the NYSE, nosotros had 7 novel 52-week highs, but 246 novel lows. Note that 52-week novel lows inwards Jan swelled to over 700. Among S&P 600 pocket-sized caps, Fri had ii novel 52-week highs too eighty novel lows. (January's novel lows exceeded 200). And finally, alongside the S&P 500 large caps, nosotros had no novel highs too 73 fresh annual lows. (January's novel lows too exceeded 200). Long story short, in that location are divergences inwards the high/low information that brand me interrogation the downside from here.

* Sentiment - As my recent post indicated, watch is quite bearish too is showtime to hitting levels associated with recent marketplace bottoms. Shorter-term, nosotros decease on to run across weakness inwards the NYSE TICK, with the cumulative line of piece of employment inwards a clear downtrend. I require to run across prove of buying involvement inwards the TICK earlier aggressively pursuing the upside inwards this market. Seven of the in conclusion 8 trading sessions accept seen internet selling inwards the Cumulative Adjusted TICK; my breakdown of buying vs. selling involvement shows overwhelmingly inwards a higher house average selling delineate per unit of measurement area during that time. The coast is non clear for bulls unless too until this selling delineate per unit of measurement area abates too nosotros run across prove of above-average buying (which has occurred alone i time inwards the by 8 sessions).

* Overbought/Oversold - My Cumulative Demand/Supply indicator is a pilus breadth away from the -30 orbit that has typified recent bottoms inwards the stock market. Supply has exceeded need for vi of the by 7 trading sessions, which shows odd sustained selling activity. (Recall that Supply too Demand are indexes of the publish of stocks closing below vs. inwards a higher house the volatility envelopes surrounding their moving averages). Longer-term, nosotros accept 18% of SPX stocks trading inwards a higher house their 200-day moving averages too 14% trading inwards a higher house their 50-day moving averages--quite oversold, but withal inwards a higher house the really depression levels registered inwards January(14% too 8%, respectively).

* Advance-Decline Lines - We're seeing novel lows inwards the AD Lines for NYSE mutual stocks too for NASDAQ 100 stocks, S&P 500 stocks, too S&P 600 stocks. It is clearly premature to survive aggressively buying the marketplace spell this indicator remains inwards a downtrend across the board.

In sum, we're seeing levels inwards the indicators consistent with momentum marketplace lows. Price lows tin give off beneath such momentum lows, too thus it is non at all inconceivable that nosotros could run across to a greater extent than downside inwards the days to come. Indeed, recent action has been skewed solidly to the downside, making bottom-fishing dangerous. Still, for the firstly fourth dimension inwards this comport market, we're seeing divergences inwards the information fifty-fifty amidst the selling delineate per unit of measurement area too bearish sentiment. That has me questioning the longer-term viability of the downside.
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Info!! Tracking The Footprints Of Provide In Addition To Bespeak Inwards The Stock Market

In approximately ideal, dispassionate basis all participants inwards fiscal markets would acquit similar my friend NRK too solely purchase at bid prices too sell at offers.  It's a groovy agency to create good inwards auction markets, too in that location are optimal execution platforms that volition make that for large marketplace participants.  The employment amongst optimal execution is that y'all oft cause got to hold back to buy the farm expert prices, too cost tin buy the farm away from y'all spell you're waiting.  That tin hap if you're looking for a manage inwards a hot existent estate marketplace or if y'all essay entering on boundary orders inwards a fast market.  

The truth of the thing is that the basis is neither ideal nor dispassionate.  People chase cost bubbles too puke out of positions when everyone else is doing the same.  Real basis traders--and fifty-fifty those execution systems--recognize this too allow for execution amongst urgency.  When markets are moving amongst signs of momentum, it's acceptable to elevator offers too hitting bids to participate inwards the movement.  Of course, inwards this less than ideal world, there's also that modest inconvenience called cognitive bias.  We all also oft extrapolate direct lines too remember that every displace higher or lower is a budding trend.  That gets us executing amongst urgency to a greater extent than oft than genuinely objective signs of momentum would dictate.

The long too curt of this foray into the vicissitudes of determination making is that fifty-fifty the largest marketplace participants larn out footprints equally to their intentions.  Yes, they tin chop orders upwards into pieces too execute inwards baskets too merchandise on dissimilar exchanges.  At the halt of the day, however, their transactions occur inside a bid/offer matrix, too they are either executing amongst urgency or they are not:  they are either willing to pay the seller's cost or they're willing to allow markets sell downwards to their desired buying level.

When y'all analyze markets transaction past times transaction, y'all tin really come across the stream of trades too book hitting bids too lifting offers--and y'all tin rail the evolving sentiment/urgency of marketplace participants.  That is highly useful data that is obscured past times looking at traditional intraday or daily charts.  H5N1 daily nautical chart is a telescope, revealing a large picture.  Viewing markets transaction past times transaction to discover the flows of trader behaviour requires a microscope.  H5N1 major fault that traders brand is attempting to engage inwards microscopic analyses past times changing the magnifying ability of their telescopes.

Above is a nautical chart that tracks a mensurate of "volume flow" that I've spent the amend business office of this weekend constructing.  It looks at every merchandise for every stock inwards the NYSE universe too identifies where the transacted cost occurred inside the bid/offer matrix existing at that time.  If the book of that transaction occurred nearer to the bid price, it is considered "selling volume".  If the book occurred nearer to the offering price, it is considered "buying volume".  The book stream mensurate is a running full of buying vs. selling volume.  If y'all remember of it equally a volume-weighted NYSE TICK mensurate or equally a cumulative Market Delta for all stocks, y'all wouldn't last far off the mark.

Much equally I dearest the TICK measure, it is democratic to the indicate of promiscuity.  All upticks too downticks are equal, whether they stalk from the smallest microcaps or the bluest of bluish chips.  That is non hence helpful when trading a capitalization-weighted index.  You tin cause got relative forcefulness or weakness amid modest caps equally business office of a sector rotation that volition skew the TICK measure--sometimes considerably.  H5N1 volume-weighted TICK measure, on the other hand, naturally weights larger, to a greater extent than actively traded issues to a greater extent than highly, providing a potentially amend supply/demand see for the stocks that thing inwards the index beingness traded.

Note to a higher house how selling flows were quite moderate inwards early on merchandise too hence accelerated fifty-fifty equally cost was topping out for SPY.  This is potentially useful data for the intraday trader.  

As I operate amongst the novel measure, I promise to portion farther findings too details.  The of import takeaway is non nigh the specific measure--it may or may non add together value over time.  Rather, what is of import is looking at markets inwards fresh ways too sustaining a procedure that periodically renews too extends your perspectives.  Looking at the same charts too indicators equally everyone else is a groovy agency of replicating the returns of everyone else.  If y'all wishing distinctive returns, y'all demand to see markets through distinctive lenses that break fresh opportunities.  It used to last that dependent meant next a exceptional develop of rules or processes.  In crowded, ever-changing markets, however, creativity is the novel discipline.

Further Reading:  Why to Keep a Journal
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Info!! Coin Menstruation Into The Consumer Discretionary Sector

My terminal post took a await at coin flows inside the financial sector of the S&P 500 large cap stock universe. (See that post for an explanation of coin menstruum as well as how it is calculated).

The financial sector is particularly of import to marketplace sentiment, given the concerns we've had over banking company losses as well as credit quality.

A minute sector I'm next closely is the consumer discretionary stocks, which are sensitive to consumer behavior--and thus the comport upon of recession. If the stock marketplace is looking past times recession to a recovery, nosotros should come across inflows of uppercase to the consumer discretionary area. If the marketplace is anticipating deepening as well as to a greater extent than prolonged recession, however, nosotros should come across outflows from these shares.

The nautical chart higher upward depicts five-day coin flows vs. the XLY (consumer discretionary) sector ETF. The flows are based upon the 10 nearly highly weighted stocks inside XLY. These are: MCD, DIS, CMCSK, TWX, HD, NWS, TGT, LOW, NKE, as well as VIA.B.

We tin come across a designing inward the coin flows for consumer discretionary issues that is like to the i nosotros observed with financials as well as with the Dow Industrials stocks overall. Going into the Jan lows, nosotros saw consistent outflows from the consumer discretionary sector as well as and then sustained buying during slowly Jan as well as February. Outflows diminished alongside the March lows and, since early on April, we've seen resumed inflows to the sector.
This designing of waning selling see since the Jan lows is confirmed past times new high-new depression information for the stock marketplace overall as well as past times my operate on the Cumulative NYSE TICK. It is fair to enjoin that the diverse measures taken to assistance the economy, from charge per unit of measurement cuts to infusions of uppercase into banks as well as financial stimulus, cause got stemmed selling pressure level inward the market.

It is also clear, however, that these measures cause got non generated important inflows into stocks. While we've seen internet inflows to the consumer discretionary surface area since the inaugural off of April, the nearly recent toll forcefulness inward the sector has non been accompanied past times meaningful dollar flows. The Feb rally inward XLY failed when toll highs slowly inward the calendar month came on diminished uppercase inflows. H5N1 like designing may survive showing upward during April's market. XLY has moved to novel toll highs, exactly coin flows to the sector are lagging.

It is i affair to come across a drying upward of selling; it's about other to sustain buying. So far we've seen a notable decrease inward selling manifested across several see measures. Buying sentiment, on the other hand, remains muted of late--something nosotros volition necessitate to rails every bit nosotros merchandise at an of import surface area of long-term toll resistance inward the wide market.
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Info!! 2 Things I'm Watching Re: Intraday Sentiment

Note 2 dynamics inwards intraday thought hence far today:

1) We've traded largely below nix inwards NYSE TICK (note bluish moving average of TICK) throughout the morning, equally stocks select persistently traded on downticks vs. upticks. Noticing that (and tracking the themes amid USD, currencies, in addition to sectors) was telephone substitution to seeing that nosotros would pause below the of import 1137 expanse back upward mentioned inwards the morn briefing;

2) TICK levels select seen progressively higher lows, suggesting a potential drying upward of selling delineate per unit of measurement area over the shape of the morning. If that tin hold out followed upward alongside an expansion of buying--and TICK that stays dominantly to a higher house zero--we could come across meaning curt roofing add together to whatsoever bounce. We remove to outset registering TICK values of +800 or greater, however, to advise that fresh buying, non but curt covering, is coming into the market.

The lows from 1/12 in addition to 1/13 correspond of import support; a pause below those would probable convey meaning selling interest.
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Info!! Tracking Instantaneous Render Together With Remove Inward The Stock Market

This is the commencement post service inward a serial inward which I illustrate indicators that I follow inward trading the SPX stock index.  I accept illustrated amongst the SPY ETF (blue line), but the same principles concur amongst the ES futures, which is what I trade.  The nautical chart higher upwards represents 1-minute information points for Friday, Dec 23rd.

The ruddy trouble represents 2nd to 2nd upticks versus downticks for all listed stocks, non simply those included inward the SPX or NYSE universe.  (Raw information from e-Signal).  When the ruddy trouble moves higher upwards zero, nosotros accept to a greater extent than stocks trading on upticks than downticks.  When it is below zero, nosotros accept to a greater extent than stocks trading on downticks.  This makes the mensurate an unusually sensitive barometer of buying as well as selling involvement across all stocks.

Several patterns ready during the solar daytime (all times EST):

1)  We had a outburst of buying a piddling later the 10 AM hour, soundless SPY was unable to brand fresh session highs.  This departure occurs when buyers are no longer able to propel stocks higher.  As sellers come upwards in, those buyers accept to halt out as well as that creates a short-term downwards move.

2)  Notice how nosotros made session lows a piddling later the eleven AM hr on skillful selling pressure.  We tested those lows approximately 1 PM, but observe how nosotros had less selling pressure.  As stocks tried to brand novel lows, selling dried up.  This oftentimes precedes a rally, every bit sellers are forced to halt out i time buying steps in.

3)  Note how upticks outnumbered downticks significantly for most the afternoon session.  With selling drying up, buyers remained inward command for most the session.  Influenza A virus subtype H5N1 cumulative trouble of the the States TICK mensurate is a handy agency to reckon the tendency of buying vs selling.  The cumulative trouble was inward a continuous uptrend from close 1 PM forward.

This is simply i indicator that I rail on a 2nd to 2nd dry reason during the trading day.  The thought is to chop-chop position turns inward buying versus selling sentiment.  I discovery piddling bespeak to brand reference to nautical chart patterns or traditional technical measures when a straight index of buying as well as selling action is readily available.

Over the course of report of many days, you lot meet patterns look as well as reappear.  It is sensitivity to those patterns--and the mightiness to relate patterns to i some other inward existent time--that enables the trader to grasp the important as well as significance of marketplace position movement.

Further Reading:  Using Upticks as well as Downticks to Identify Trend Days inward the Market
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Info!! Trading Notes: Calendar Week Of 8/31/15

Friday, September 4th

*  We showed early on forcefulness yesterday, but book flows were suspiciously weak for much of the morn too failed to confirm the highs of the twenty-four lx minutes menses (see nautical chart below).  Volume flow is a proprietary volume-weighted mensurate of upticks vs. downticks for all stocks traded across all exchanges too tells us whether size is to a greater extent than oftentimes than non leaning to the purchase side or sell side.  Volume weighting the NYSE TICK achieves much of this purpose.  Once nosotros began to come upwards off the highs, nosotros saw a steady reject inward book flows, every bit nosotros chop-chop turned negative on the day.  Tracking such flows is my favorite way of "reading the tape": when the record does non confirm signals from quant models, I desire to quest heed to the tape.  It to a greater extent than oftentimes than non way that something idiosyncratic is moving the market: something models aren't accounting for.

*  We're trading significantly off yesterday's highs too then far this morning, with fresh selling inward premarket.  All of this is consistent with the sentiment of an extended bottoming procedure next a potential momentum depression registered final week.  As mentioned yesterday, during these high volatility periods, the percent of stocks trading inward a higher house their short-term moving averages ends upwards beingness a helpful overbought/oversold gauge.  Yesterday, good over 80% of SPX stocks were inward a higher house their 3-day moving averages.  

*  My full general game excogitation is to sell bounces, peculiarly on tepid book flows, but we're quite short-term oversold here, too then I'm prepared to hold back for a reasonable bounce inward cost and/or time.

Thursday, September 3rd

*  Buying weakness per yesterday's post service worked reasonably good yesterday, though a unopen aspect at NYSE TICK showed a two-way marketplace with active participation from both buyers too sellers.  We hold to endure oversold on intermediate-term measures too nosotros soundless receive got solely a niggling over 20% of SPX stocks trading inward a higher house their five-day moving averages.  My game excogitation remains to purchase weakness that remains inward a higher house the overnight lows.

*  One of the ameliorate decisions I've made inward trading lately has been to plough my models off in 1 lawsuit it became clear that nosotros were trading inward a dissimilar volatility authorities from the 1 that has persisted for much of the final 2 or too then years.  My latest projection is edifice models specific to defined volatility regimes.  Early days, but results aspect promising.  One intriguing finding is distinct short-term hateful reversion effects inward SPY for the electrical flow regime.  For example, when the issue of five-day novel highs minus novel lows for SPX stocks is nix or above, the adjacent 5 days inward SPY receive got averaged a loss of -.12%.  When the five-day novel highs minus lows receive got been below zero, the adjacent 5 days receive got averaged a gain of +.49%.  In general, chasing short-term forcefulness or weakness has non been a winning strategy; higher volatility does non imply greater trending.  (Raw information from the first-class Index Indicators site).

*  I'm concurrently working on the best ways of defining volatility regimes, using realized volatility, implied volatility, too to a greater extent than esoteric measures of vol based on published query inward quant finance.  This strikes me every bit a fruitful expanse of research.  Also on the docket is a Definition of correlation regimes too investigation of how returns may vary every bit a portion of higher too lower correlations alongside stocks.  The destination is to receive got a suite of models built out for a make of regimes, too then that at that topographic point are clear rules for turning off 1 beginning of trading signals too turning on another.  I am non at all convinced that a unmarried model tin accurately capture a high proportion of variance inward forrad returns for stocks, which is or too then other way of maxim that stocks comport differently inward higher too lower volatility too correlation regimes.  Having a laid of models to capture those differences could assist discretionary traders accommodate to their environments to a greater extent than quickly.

Wednesday, September 2nd

*  Many thank you lot to Sean McLaughlin for hosting this podcast on taking your trading to the adjacent level.  I'll endure elaborating many of these ideas too to a greater extent than at the first-class Stocktoberfest gathering.

*  Once again, the selling of bounces has worked good inward trading the ES.  We're at nowadays at an oversold point, however, where I am mindful of the possibility of putting inward a short-term bottom.  Fewer than 1% of SPX stocks are trading inward a higher house their 3-day moving averages too my intermediate-term forcefulness mensurate is rattling oversold.  Although nosotros saw weakness yesterday with 111 novel monthly highs too 431 lows, that is nowhere nigh the weakness final week, when nosotros registered 35 highs too 3553 monthly lows on the large spike down.  My game excogitation is to purchase weakness that holds inward a higher house yesterday's lows too peculiarly that successfully tests yesterday's lows.

*   VIX is over xxx too my pure volatility mensurate is significantly elevated.  I await vol to hold inward the nigh term, which has large implications for sizing of positions too calculations of stops too targets on trades.  The inability to accommodate to changes inward volatility--especially when nosotros receive got high vol of vol--is a major beginning of problems for traders inward the electrical flow market.

Tuesday, September 1st

*  Selling bounces has worked good too we've come upwards off difficult afterward hours, resuming the reject inward the human face upwards of Asia weakness.  Volume flows were bearish all twenty-four lx minutes menses on Tuesday, helping laid upwards the weakness. (Volume flow is a volume-weighted mensurate of upticks vs. downticks for all exchange-listed shares).  The pure volatility mensurate remains elevated, too I hold to anticipate highly volatile trading.  It is non clear to me that nosotros only caput lower inward a similar a shot line; intermediate-term measures are quite oversold.  I receive got been treating each fourth dimension zone every bit a carve upwards day--Asia, Europe, U.S.--and that has been helpful inward framing short-term trades.  There are considerable discontinuities of flows from 1 fourth dimension zone to the next; greater continuity inside each fourth dimension zone.

*  Below is a nautical chart of a elementary five-period charge per unit of measurement of change, where each bar inward the ES futures represents 500 cost changes.  It is 1 tool alongside many that I utilization to frame whether the marketplace is short-term overbought or oversold.  One of my execution rules is to hold back for short-term overbought weather condition to sell too short-term oversold ones to buy.  In volatile markets, that tin relieve a lot of messiness.  Many a proficient sentiment is undermined past times misfortunate entry too instruct out execution.  I'll endure discussing my utilization of such tools inward the Las Vegas conference for Trader4ACause.

*  I hold to scout commodity markets, every bit good every bit Asian stocks, for indications of the economical weakness that is impacting stocks.  This is or too then other expanse inward which monitoring activeness past times fourth dimension zone has been helpful.  I hold to lean toward selling bounces,  but am mindful that we're short-term oversold here, too then am content to hold back for shorts to endure squeezed earlier taking whatever swing positions.

Monday, August 31st

*  We focus on setting goals too tracking our progress toward those goals, but a wealth of show suggests that a procedure focus is much to a greater extent than probable to Pb to positive outcomes.  When nosotros emphasize doing the correct things, nosotros are most apt to create things right.  This is a rattling of import topic, every bit much of the flight-and-fight disruption of information processing too decision-making occurs when we're P/L focused too non genuinely trading focused.

*  My pure volatility mensurate has been percolating higher, too then I'm prepared for a proficient amount of motility inward stocks.  H5N1 slap-up routine is to compare intraday book of SPY with the book at the same fourth dimension of twenty-four lx minutes menses for the past times several sessions.  Because book too volatility correlate highly, the real-time tracking of relative book helps us intelligently justice the probable make for the day.

*  We've come upwards off Friday's highs inward overnight trading, with weakness inward Asia too Europe.  My game excogitation is to sell ES on bounces that neglect to receive got out overnight highs.  I'm non at all certain we're done hearing most EM too mainland People's Republic of China weakness too associated commodity weakness; the sentiment of an effective quantitative tightening raised past times Deutsche Bank final week is 1 worth pondering for implications.

Info!! Swing Trading Amongst Transition Patterns

My recent post focused on making the transition from daytrading to trading larger fourth dimension frames. Let's get amongst the deed from daytrading to swing trading, where swings are defined equally moves lasting from 2 days to a calendar week inwards duration.

The advantages of swing trading are that the fourth dimension frame allows for nimble motion in addition to a practiced grade of adventure control, spell even thence participating inwards overnight movement.

Two patterns that I similar for swing trading are breakout patterns in addition to what I telephone phone transition patterns. This post service volition bargain amongst the latter.

Transition patterns score a transition from a rising marketplace to a falling 1 (or vice versa), ofttimes when trending markets demand maintain larn arrive at saltation on a longer fourth dimension frame.

The transition occurs inwards several phases: first, a momentum pinnacle inwards which a peachy bulk of stocks, sectors, in addition to indexes are making novel highs or lows; in addition to then a meaningful retracement from that peak; in addition to then tests of the momentum highs/lows that ultimately come upward on lower book in addition to amongst weaker participation of stocks in addition to sectors. It is those secondary tests amongst pathetic participation that offering the best entry points. Once you lot encounter the exam neglect in addition to selling/buying come upward into the marketplace inwards enhanced size, you lot desire to bring together that deed on its outset retracement.

In the nautical chart higher upward (click for detail), nosotros tin terminate encounter 2 transition patterns. The outset occurred amongst the momentum pinnacle slowly on 12/13 in addition to early on 12/14, followed past times the turn down into 12/15 in addition to and then a secondary pinnacle on 12/16. Some sectors made fresh highs on 12/16 (such equally XLB, XLE), simply many others did not. Once nosotros could non sustain the highs closed to 1111 inwards the ES futures, nosotros moved steadily lower into 12/17 in addition to 12/18.

A 2d transition blueprint was alluded to inwards my recent weblog entry on reversals in addition to continuation. The lows of 12/17 inwards the ES futures were followed past times 12/18 lows inwards ES, simply non inwards other indexes. Our momentum depression was 12/17 in addition to our unsuccessful exam occurred on 12/18, leading to a reversal deed dorsum into the 12/17 range.

Note that these transition patterns, taken together, house us squarely inwards a trading range. The swing trader is trading that range--and eventually could merchandise a breakout from that range. Thus, for instance, I demand maintain a long seat from the unsuccessful exam at 12/18, amongst an initial target of 1100 (range midpoint) in addition to a larger target of 1112 (range high). Because the merchandise moved inwards my favor slowly inwards the day, my halt is moved to breakeven. (My entry was based on a shift inwards NYSE TICK, Market Delta, in addition to lead/lag sector behavior, based upon the italicized judgement above; the specific integration of those indicators is proprietary).

Transition patterns operate past times trapping longs in addition to shorts that are counting on continuation of a directional move. Because they are forced out of their positions, the marketplace reversals tin terminate live quick in addition to quite profitable on a swing fourth dimension frame.

For to a greater extent than on the transition pattern, encounter below:

* Trading the Transition Pattern

* Transition Trade inwards the Currency Market

* A Short-Term Transition Reversal

* Using Sentiment to Track Market Transitions

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Info!! Proactive Together With Reactive Trading

When trading ranges are restricted, the total that intraday traders tin accept out of whatsoever given marketplace displace volition hold out limited. This makes execution--the might to obtain expert prices that maximize vantage relative to risk--particularly of import inwards choppy marketplace conditions.

I define reactive trading equally trading that is impulsive, ofttimes initiated past times a fear of missing a displace that seems to hold out getting nether way. Instead of beingness guided past times a forrad feel for where the marketplace is probable to go, the trader jumps aboard moves that facial expression similar they're going. More ofttimes than not, those moves reverse, leaving the merchandise underwater as well as the trader frustrated.

This is 1 argue why I similar to showtime trades amongst profit targets, non entry setups. You function into a concern corporation alone if you lot run into important lucre potential: if the big film isn't correct for an entrepreneur, the corporation isn't worth pursuing. Each merchandise is a concern corporation inwards miniature: it begins amongst a recognition of meaningful potential for gain. Only as well as then does the entrepreneur/trader figure out how to pursue the corporation thence equally to bound overhead as well as maximize profit.

In a range market, as well as especially inwards tedious marketplace conditions, it is necessary to temper one's expectations. Early inwards the morn when inwards a range, I'm looking to run into if nosotros are to a greater extent than probable to accept out the overnight high or low; yesterday's high or low; the R1 or S1 level; etc. Incoming relative volume helps us sympathise how much participation in that location is inwards the market, which volition render useful guidance for how far we're probable to move.

Measures of intraday sentiment, such equally NYSE TICK as well as the Cumulative Market Delta, volition give us of import guidance equally to the probable directionality of movement.

Together amongst lucre targets, our estimates of volatility as well as directionality assist us frame proactive trades inwards which nosotros hold off for pullbacks from the expected management of induce to function into anticipated moves to our targets. By defining cost and/or indicator levels where our merchandise thought is clearly incorrect as well as sizing the initial entry amongst a fraction of one's full buying power, nosotros both define as well as command risk, fifty-fifty equally nosotros pursue lucre amongst an entrepreneurial spirit.

Discretionary trading involve non hold out reactive trading. H5N1 expert entrepreneur passes upwards many concern ideas earlier setting forth amongst a specific venture. So it should hold out amongst trading. If you're a developing trader, the links inwards this article volition assist teach you lot started.
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Info!! Using The Intraday Equity Put/Call Ratio To Guess Sentiment

suggested that nosotros mightiness hold upward inwards to a greater extent than of a arrive at environment. H5N1 pose out of traders apparently did non brand this shift; past times the halt of the day, I heard from to a greater extent than than a few frustrated bears.

The intraday CBOE equity put/call ratio (above) helps us empathise what was going on. Average put/call levels since the outset of 2010 convey been unopen to .63. Notice how bearish stance grew through the morning, fifty-fifty equally stocks were basing. Once the marketplace broke out of its morning time arrive at on company buying involvement (NYSE TICK) in addition to volume, put/call levels never dipped below average in addition to indeed stayed elevated during the afternoon. This bearishness helped buoy the marketplace through the afternoon trade.

Once nosotros broke obvious support, it was apparently fourth dimension to hold upward short. Unfortunately, markets rarely vantage what is readily apparent. H5N1 await below the surface at the put/call stance showed that the brusk side was crowded--and that gear upward a meaning reversal.
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Info!! Trading Notes: Calendar Week Of October 12Th

Friday, Oct 16th

*  Yesterday's abrupt rally as well as novel high unopen for this displace fits with the "buy weakness, sell strength" thought from yesterday's posting as well as is consistent with the thought of a marketplace that may receive got topped inwards upside momentum, but non price.  It was interesting to run across that nosotros had 609 stocks brand fresh monthly highs yesterday, downwardly from the 1274 novel highs terminal Friday.  Such breadth divergences tin give notice survive expected to dice on if nosotros indeed receive got made a momentum peak for this cycle.  It's when nosotros run across pregnant expansion of stocks/sectors making fresh short-term lows that nosotros demand to seriously consider the market's downside.

*  Meanwhile, volatility continues to survive crushed with VIX closing roughly 16, downwardly from roughly 27 belatedly inwards September.  My pure volatility mensurate also hitting novel lows as well as is getting unopen to levels that are associated with subnormal upside returns.  It has been challenging for traders to suit to the reduced volatility, which punishes trading on momentum as well as rewards patient, counter-trend entry execution as well as quick, tactical profit-taking.

*  Influenza A virus subtype H5N1 projection I volition start out this weekend is gauging the expectable size as well as duration of moves based upon volatility regimes.  My sense is that such an approach could aid making trading far to a greater extent than flexible as well as adaptive than it currently is for many traders.

Thursday, Oct 15th

*  So here's my query of the day:  Why practise thus many bastions of capitalism pursue alter via centralized planning?  From large corporations to finance firms, capitalist enterprises increasingly rely on key planning every bit they grow.  Indeed, if countries ran their economies the way many companies run their businesses, we'd sentiment them every bit communist/socialist bureaucracies hopelessly out of date.  We extol "leadership" inwards corporations as well as large organizations; maybe that's how dictators retrieve of themselves inwards centrally planned economies.

*  Influenza A virus subtype H5N1 adept purchase merchandise early on inwards the 24-hour interval reversed on the WalMart word as well as stocks traded off through much of the session yesterday, though they've recovered inwards overnight trading.  This dorsum as well as forth is what we'd hold off if nosotros late hitting a momentum peak for the electrical flow cycle as well as immediately are engaged inwards a topping process.  In that scenario, buying weakness as well as selling forcefulness makes sense.  Yesterday closed with farther weakness, every bit nosotros had 348 stocks brand novel monthly highs as well as 261 register fresh monthly lows.  That novel lows figure is the highest we've seen since Oct 2nd.

*  The weak retail sales divulge as well as WalMart word highlights what seems to survive a changed story:  instead of economical increment justifying a Fed hike, there's increasing verbalize of economical weakness as well as no hike this year.  If the topping out scenario holds, thus we're seeing a cycle peak cresting below the prior peak, volatility bottom at higher levels, as well as increasing concerns of recession--all bearish on a longer fourth dimension frame.  I volition dice on to monitor breadth measures to run across if this scenario is playing out.

*  I've heard from multiple sources that this has been a hard trading environment, with pathetic P/L, for many traders.  Per yesterday's entry, we're seeing reduced volatility inwards stocks as well as reduced volatility of volatility.  In such an environment, induce fails to extend--and becomes to a greater extent than consistent inwards failing to extend.  That form of reversal manner is hard for traders wanting to merchandise momentum or trend.  I'm non certain many traders explicitly run on adapting to changes inwards volatility regimes.  In such cases, sticking to a procedure is really a failure to adapt.

Wednesday, Oct 14th

*  Per yesterday's postal service nosotros indeed saw cost consolidation inwards Tuesday's session as well as we've immediately worked off the short-term overbought conditions.  According to the Index Indicators stats, at Tuesday's unopen nosotros had nether 19% of SPX stocks unopen higher upwards their three-day moving averages as well as nether 32% unopen higher upwards their five-day averages.  In general, especially every bit uptrends mature, I similar to survive a buyer when the bulk of shares autumn below their short-term moving averages as well as lighten upwards when the bulk are short-term stretched as well as rolling over.  My leaning is toward the purchase side if nosotros run across selling dry out upwards higher upwards the overnight cost lows.

*  Below is an interesting nautical chart that looks at the volatility of the pure volatility measure that I track, with the nautical chart going dorsum to August 17th.  Notice how the volatility of volatility spiked during the August reject as well as has since returned nigh levels seen prior to the market's drop.  Vol of vol tells us something virtually the stability of cost action, which inwards plow tells us something virtually the participation of marketplace makers.  If a marketplace is dominated past times marketplace makers, nosotros oscillate betwixt bid as well as offering as well as bulk cannot displace cost a keen deal.  If marketplace makers push clitoris dorsum as well as the gild bulk becomes to a greater extent than sparse, a given unit of measurement of bulk tin give notice deport on cost much to a greater extent than greatly.  Interestingly, when vol of vol is inwards its highest quartile since belatedly 2013, the side past times side 4 days inwards the ES futures average a gain of +.34%.  When vol of vol is inwards its lowest quartile, the side past times side 4 days average a loss of -.05%.  As marketplace cycles mature, nosotros tend to run across a crushing of vol but also of vol of vol.  I believe we're seeing a maturation of the acquaint marketplace cycle; if that's the case, nosotros should start out to run across breadth divergences on farther strength.  Yesterday's weakness alongside minor caps mightiness survive the starting fourth dimension of that pattern.

Tuesday, Oct 13th

*  Last week's punchy postal service on why nosotros merchandise emotionally seems to receive got struck a chord.  The hits on the postal service receive got been virtually 4x average as well as it's already dice 1 of the arrive at 10 posts inwards terms of hits.  One reader took law-breaking to the linguistic communication as well as style of the post, as well as I understand with that view.  One of the things I've learned every bit both psychologist as well as bring upwards is that how you lot deliver a message has every bit much deport on every bit the message itself.  But business office of that deport on is saving the punchy style for the most of import messages.

*  We had a irksome vacation merchandise yesterday, with rangebound action.  One mensurate that helped my trading yesterday was looking at the extremes inwards the NYSE TICK.  (I typically expression at one- as well as five-minute readings during the day).  If nosotros don't receive got many positive or negative extremes, it agency that institutions but are non active inwards the market.  It takes large, handbasket executions to acquire TICK higher upwards +800 or below -800.  If you lot don't acquire those extremes early on inwards the morning, you lot tin give notice anticipate a irksome 24-hour interval as well as oftentimes a rangy one.

*  As my intermediate term forcefulness nautical chart below shows, nosotros dice on to survive stretched to the upside.  This mensurate is a five-day moving average of 5, 20, as well as 100-day highs vs. lows alongside SPX stocks.  (Raw information from Index Indicators).  In a rigid cycle, this volition arrive at out ahead of price.  I noted yesterday that I wasn't thrilled with risk/reward as well as indeed we've pulled dorsum inwards overnight trade.  I would non survive surprised to run across farther consolidation near-term, but am non expecting an outright deport move.

 

Monday, Oct 12th

*  The weekend article on "flourishing" is, inwards my view, 1 of the most of import topics inwards psychology broadly as well as trading psychology specifically.  By as well as large, traders practise a decent task of keeping themselves out of damaging, negative states of heed as well as body.  They don't necessarily brand special efforts to hold themselves inwards optimal states.  As a result, nosotros never genuinely sense how good nosotros could perform across many areas of life, including trading.

*  This past times week's entries receive got focused on rigid marketplace breadth as well as the favorable implications of high buying strength.  That has led to buy-the-dips trading as well as has done good to this point.  Breadth continued rigid on Fri with 1274 novel monthly highs, the highest figure inwards a week.  (Raw information from the Barchart site).  We to a greater extent than oftentimes than non run across pregnant corrections afterward a catamenia of waning breadth.  That exactly hasn't been occurring to this point.

*  That existence said, I'm non enamored of the risk/reward right here.  As the nautical chart below depicts, nosotros receive got come upwards downwardly quite a flake on the Pure Volatility mensurate (volatility per unit of measurement of bulk inwards the ES futures), as well as that has historically led to subnormal returns.  We're also stretched to the upside on many of my indicators, which inwards the past times has occurred nigh momentum peaks (not necessarily cost peaks).  The put/call ratios receive got come upwards down; all that leads me to believe nosotros could acquire some consolidation early on inwards the week.  

*  Should nosotros acquire some pullback this week, my leaning would survive to resume the buying strategy.  Good short-term pullbacks would survive ones inwards which a bulk of shares unopen below their 3 as well as five-day moving averages as well as where nosotros run across to a greater extent than stocks give sell signals vs. purchase signals on the technical measures I follow, such every bit Bollinger Bands, Parabolic/SAR, as well as CCI.  The past times few days we've seen many to a greater extent than purchase signals than sells on those measures, but the divulge of purchase signals tailed off on Friday.