Info!! How Relative Book Helps Us Merchandise Too Fade Marketplace Movement

This is the 6th post service inward the serial looking at indicators that I accept flora useful inward tracking the market's short-term behavior.  Previous posts inward the serial are linked below.  In this post, nosotros expect at a mensurate I telephone yell upward relative volume.  In the nautical chart above, relative book (red line) is plotted against SPY for Friday, 12/30/16.

Relative book is genuinely a ratio of electrical flow one-minute book to the average book for that minute.  Thus, for instance, if the electrical flow book at 9:39 AM is 200,000 shares too 9:39 AM book averages 100,000 shares, the relative book is 2.0.  When nosotros stance book inward this manner, nosotros tin apace run into if marketplace moves are supported past times important participation.

Notice how relative book started the twenty-four hours good elevated too stayed elevated for almost the session.  This is truthful for many tendency days:  it is the additional participation of directional players that sustains the marketplace move.  The trader watching relative book early on inward the twenty-four hours had an first-class say that this was abnormally high participation--and it was skewed to the downside.

Conversely, days inward which relative book persistently stays below 1.0 are ones inward which moves cannot attract meaningful participation.  This leads to frequent reversals of those moves inward a make environment.  Very often, we'll run into relative book tail off equally marketplace moves mature, equally novel high or depression prices neglect to attract added participation.  This oft precedes reversals, equally nosotros saw during the 10 AM hr of trading above.

When cost breaks out of a make on sustained elevated relative volume, nosotros accept a corking indication that the novel prices are attracting fresh participation, which makes the breakout less probable to endure a fakeout.  

The fundamental to agreement relative book is that, when nosotros run into elevated participation inward the market, that elevation typically comes from directional participants.  If we're going to larn a momentum/trend move, nosotros postulate the players to sustain the higher or lower prices.  The waxing too waning of relative book tells us where the market's auction is attracting activeness too where it is shutting it off--an essential distinction for short-term traders.

Previous Posts inward the Series:

*  Tracking Instantaneous Demand too Supply

*  Tracking Multiday Market Strength too Weakness

*   Tracking Market Breadth too Strength/Weakness

*  A Unique Application of VWAP to Gauge Market Strength

*  Tracking Market Strength With Intraday New Highs too Lows
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Info!! Relative Book As Well As Volatility: Agreement Who Is Inwards The Market

tracking large traders inwards the market in addition to the volume realities that every short-term trader should know. The argue book analysis is of import is because the bulk of volume--and the shifts inwards volume--can endure attributed to the participation or non-participation of large marketplace participants. These institutional traders postulate maintain the resources to displace markets, in addition to hence it is critical to empathise when they are relatively active in addition to inactive inwards the markets you're trading.

I took a facial expression at the final fourteen days of trading inwards the ES (S&P emini) futures contract in addition to institute that the book of each 30-minute menstruum during the solar daytime correlated amongst the size of the high-low cost hit for that menstruum past times .78. That way that virtually 60% of the variance inwards volatility tin endure accounted for precisely past times knowing the book traded during that period. When nosotros position whether book is high or depression for a period, we're also able to brand an guess of probable volatility for that period.

Above nosotros run into the median book for each 30-minute menstruum inwards ES for the final fourteen trading sessions (top chart) in addition to the median high-low percent cost hit for those periods. The correlation betwixt book in addition to volatility is obvious. Also obvious is that book in addition to volatility shift substantially inside the trading day. Indeed, the median book of the 11:30 AM CT - 12 Noon CT bar is less than one-half of the median book for the market's opening 30-minute bar. The median cost hit per 30-minute period--the amount cost movement--is 40% smaller for the midday menstruum compared amongst the opening one.

This changing volume/volatility dynamic inside the trading solar daytime has of import implications for the intraday trader, including the placement of stops in addition to cost targets. I late corresponded amongst a rookie trader who placed his stops in addition to cost targets a fixed publish of points from this entry. While this provided the illusion of managing risk, it was ineffectual. The fixed halt signal was hitting precisely past times random cost motion during the busy periods of the day, taking the trader out of skillful trades. Conversely, during tiresome periods, the trader's cost targets were never hit, leading to reversals of his newspaper profits. The trader sought me out for aid inwards dealing amongst his emotions, but inwards fact his work was his failure to arrange to shifts inwards volatility.

This same work occurs amidst fifty-fifty relatively sophisticated traders who convey expectations of cost motion from the final solar daytime or 2 to the introduce trading day. They anticipate or in addition to hence motion than the marketplace is genuinely giving them, leading to premature exits from skillful trades on busy days in addition to failure to accept profits on trades when markets are slow.

So how tin nosotros guess the volatility of the solar daytime that we're currently trading, in addition to hence that nosotros tin arrange accordingly? The catch of relative book is that yous compare the book for the recent fourth dimension menstruum amongst the average book for that same fourth dimension menstruum over the past times X days. For example, I know that the median book for the fourth dimension menstruum of 12:30 - 1 PM CT is 113,785 contracts, amongst a criterion divergence of 53,262 contracts. If I run into book for that menstruum transcend 200,000 contracts during the trading day, I know that this is a pregnant boundary inwards book relative to the recent past. It alerts me that institutional traders are relatively active inwards this market, in addition to hence I volition pay detail attending to whether they are buying or selling (by analyzing NYSE TICK in addition to Market Delta for that period). It is out of such surges inwards participation that breakout moves in addition to trends are oftentimes born.

Conversely, if I know that if the opening one-half lx minutes of merchandise averages 259,412 contracts amongst a criterion divergence of 66,817 contracts in addition to run into that the electrical flow opening menstruum has alone traded 150,000 contracts, I know correct away that large traders are non dominating this market. This volition Pb to reduced volatility, in addition to it typically leads to a choppier trade, every bit marketplace makers force the marketplace to in addition to fro to brand their scalping profits. H5N1 marketplace dominated past times marketplace makers trades really differently from a marketplace dominated past times prop traders in addition to fund portfolio managers. By recognizing relative volume, yous tin also position who is relatively active inwards the marketplace--and that volition render yous amongst valuable clues every bit to how much--and what type of--opportunity is present.

Note: If at that topographic point is sufficient interest, I tin shipping existent fourth dimension relative book information via Twitter in addition to every bit utilisation of the indicator updates on the blog. The RSS subscription to Twitter is costless of charge; the weekly indicator updates typically seem on Mon prior to the marketplace open.
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Info!! An Introduction To Trading: Stock Marketplace Cycles

initial postal service inward this series focused on the importance of approaching the markets with a conceptual framework. In this post, I desire to accept a stride dorsum too explicate to readers how I persuasion movements inward the stock market. This is a conceptual construction that helps me to remember virtually how the moves inward today's marketplace relate to those from the 24-hour interval before--and the 24-hour interval to come. This construction applies non alone to daily marketplace movement, but also elbow grease on smaller too larger fourth dimension frames. I claim no originality inward this presentation; I remember you'll uncovering related concepts from a host of technicians, from Joseph Granville to Stan Weinstein to George Lindsay. Indeed, much of technical analysis lore--from double-bottom too head-and-shoulders patterns to oscillator too indicator divergences--spring from this variety of conceptual structure.

The telephone commutation thought is that markets, at whatever fourth dimension frame, displace inward aperiodic cycles. Influenza A virus subtype H5N1 bicycle is a construction that includes ii or to a greater extent than marketplace tops and/or bottoms. Like snowflakes, cycles stimulate got several defining features, but no ii cycles are completely identical. Cycles are aperiodic inward that tops too bottoms practice non occur at regular, predictable fourth dimension periods. These cyclical structures occur on an intraday basis, swing basis, too over longer periods of weeks too months.

The nautical chart higher upwardly is a highly idealized persuasion of a marketplace cycle. It begins with a abrupt upward elbow grease from a depression point, with wide participation inward the rise. The bull displace attracts interest--and often volume--until nosotros hitting a quest of maximum upward momentum too strength, which I stimulate got labeled every bit a momentum high. At a momentum peak, nosotros volition typically meet a large number of stocks making novel highs relative to novel lows; we'll also often meet expanded volume; too overbought readings on many marketplace oscillators.

The higher prices attract sellers too a reject ensues that is a to a greater extent than pregnant reject than had been seen during the prior rise. I've labeled this every bit a "separating decline", adopting a term from Lindsay. During this decline, surely marketplace sectors concord upwardly relatively well; others dip significantly. Market indicators volition typically displace from overbought to to a greater extent than neutral levels and, nosotros volition typically meet a reversal of prior activeness inward bonds, currencies, and/or commodities. This alerts us to the possibility that something is shifting inward the fiscal landscape.

From this separating decline, nosotros typically become 1 or to a greater extent than subsequent rallies, often that accept the wide marketplace indexes to novel cost highs. At these highs, however, nosotros often meet fewer stocks making novel highs, fewer sectors participating inward the strength, too weaker upside momentum readings. Very often, we'll also meet non-confirming activeness inward those correlated markets: involvement rates, commodities, too currencies. As the marketplace makes these fresh cost highs, upside line too momentum are waning. Divergences laid out to accumulate.

With the waning upside, those shifts with property classes Pb to selling pressure level inward the wide indexes, taking the bulk of shares lower. This reject continues until nosotros hitting a quest of maximum downside momentum, at which nosotros meet stocks making novel lows dramatically outnumbering those making novel highs; a typical expansion of book on panic selling; too really weak oscillator readings.

Here, too, this quest of maximum downside momentum tends to endure followed past times a separating ascent that is notably stronger than the upside reversals that occurred during the market's downward move. Some sectors bounce really strongly off their lows; others ascent alone a little. This bounce is normally accompanied past times a displace to to a greater extent than neutral momentum too line readings inward indicators. Not infrequently, we'll also meet reversal moves inward involvement rates, currencies, and/or commodities.

This ascent is followed past times 1 or to a greater extent than subsequent declines that may accept the wide indexes to fresh cost lows. During this latter decline, nosotros meet fewer stocks making fresh novel lows, reduced downside momentum, too divergences with many marketplace indicators. We may also meet non-confirming activeness inward those related property classes. This waning of selling too thus emboldens buyers, too nosotros start a fresh cycle.

The nesting of these cycles inside 1 to a greater extent than or less other agency that whatever given bicycle volition stimulate got a shape that is partially determined past times the cycles of higher-order magnitude. If the marketplace on a longer fourth dimension frame is inward a rallying mode, for example, a short-term bicycle volition tend to stimulate got an elongated ascent too a pocket-sized subsequent decline. The structural qualities of the cycles volition typically endure present, but their timing too shapes volition vary, fooling many traders.

It takes a spell to prepare your analytic middle to perceive these cycles. On a large fourth dimension frame, for instance, nosotros had a bottom inward October, 1998, a momentum acme inward the stock marketplace inward the get-go quarter of 2000, a cost acme inward the Dow during 2001, a momentum trough inward October, 2002, too a cost depression inward March, 2003. That was 1 large cyclical movement.

More recently, nosotros had a momentum acme inward June, 2007; a cost acme inward Oct of that year; a momentum depression inward January, 2008; too we--I believe--are making subsequent cost lows inward July too directly inward September of that year. If that analysis is correct, the adjacent pregnant marketplace bicycle should endure to the upside.

Note that this is non a precise timing tool, a mystical numerological scheme, or a mechanical trading system. It is a conceptual framework that guides thinking every bit to ii of import marketplace issues:

1) Is the marketplace getting stronger or weaker over time?

2) How is the marketplace activeness at 1 fourth dimension frame linked to that at other fourth dimension frames?

But why would nosotros meet such structural similarities with marketplace movements? That enquiry volition endure the topic of the adjacent postal service inward this serial too volition shape a 2nd leg to our developing conceptual structure.
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Info!! Ii Telephone Commutation Questions To Enquire When Trading The Twenty-Four Hours Fourth Dimension Frame

When trading the 24-hour interval fourth dimension frame inward the stock indexes, 2 questions are important:

1)  Who is inward the market?

2)  How are they positioning themselves inward the market?

At the most basic level, I desire to generate an estimate--as early on inward the 24-hour interval every bit possible--whether the 24-hour interval is shaping upward every bit a potential tendency 24-hour interval or hit day. 

Who is inward the marketplace is addressed past times volume.  As I've stressed inward the past, book is of import because it correlates quite highly alongside volatility.  Knowing whether we're trading higher upward average, average, or below average book gives us of import clues every bit to whether we're probable to conduct maintain a daily hit greater than, equal to, or lesser than the average range.  That, inward turn, impacts whether moves are probable to extend or contrary on a given fourth dimension frame.  

So let's conduct maintain Friday's merchandise every bit an example.  We had a real strong payrolls number, hence traders were justified inward thinking that nosotros could conduct maintain a catalyst for a strong marketplace day.  I was less convinced of that, given weakness that had been showing upward inward the market.  During the showtime 5 minutes of trading inward SPY, nosotros transacted merely a chip over 2 1000000 shares.  The average showtime 5 infinitesimal book inward SPY over the past times 3 months has been a piddling over 3 1000000 shares.  During the adjacent 5 minutes, nosotros transact well-nigh 1.8 1000000 shares.  The average for that 5 infinitesimal menses is almost 2.5 1000000 shares.

You larn the idea.

Right out of the box, nosotros conduct maintain pocket-size participation inward the market.  When book is below average, it's non that marketplace makers conduct maintain taken the 24-hour interval off.  Rather, it's the shorter together with longer-term directional participants who are non active.  It is much to a greater extent than hard to larn a vigorous tendency 24-hour interval when those directional players aren't playing.  So y'all could say yourself every pretty story inward the the world well-nigh how the payrolls reveal was a game changer, but marketplace participation inward stocks--at to the lowest degree for the 24-hour interval session--was giving a resounding yawn.

OK, hence ane time nosotros run into who is participating, nosotros tin together with hence conduct maintain a facial expression at how they are participating.  Notice the top nautical chart of the NYSE TICK, which is the cyberspace reveal of upticks vs. downticks amidst all stocks inward the NYSE universe.  (Chart is for the 24-hour interval session, where each bar = 5 minutes).  What practise nosotros run into early on inward the session?  First, at that spot is no meaning selling.  The average depression figure for each 5 infinitesimal menses is a piddling less than -300, alongside a measure departure of a piddling over 300.  Early inward trading we're non getting fifty-fifty a measure deviation's worth of selling.  Once again, nosotros tin say ourselves all nosotros desire well-nigh how weak the marketplace has been coming into the 24-hour interval session.  There merely aren't whatsoever sellers inward meaning proportion to move flora early on inward the day.

We besides don't run into a tremendous surge of buying early on inward the day, every bit nosotros larn solely ane upside reading inward the showtime one-half hr exceeding +600.  But if nosotros facial expression at the xanthous null draw of piece of occupation inward the top chart, nosotros tin run into that we're spending to a greater extent than fourth dimension higher upward that draw of piece of occupation than below.  Net activeness is skewed modestly toward the purchase side--more because of the absence of selling involvement than the presence of statistically meaning buying.

That stance is confirmed past times the bottom chart, which tracks the per centum of NYSE stocks trading higher upward their day's volume-weighted average price.  In a strong or weak trending market, the slap-up bulk of stocks volition merchandise higher upward or below their VWAPs.  When nosotros conduct maintain to a greater extent than residue betwixt buying together with selling pressure, that per centum volition facial expression pretty mixed together with non deviate far from 50%.  For the most part, early on inward the day, nosotros hovered betwixt 50 together with 60%.  Again, a pocket-size skew to the purchase side.

Within the showtime minutes of the trading day, nosotros tin generate a reasonable guess of whether the 24-hour interval is shaping upward to move a busy or serenity one; a trending or balanced one.  Note that this has aught to practise alongside nautical chart patterns, moving ridge structures, or economical fundamentals.  It's based upon how participants are genuinely behaving inward the marketplace.  We together with hence tin rails that participation over fourth dimension to seat whether the marketplace is getting stronger, weaker, or to a greater extent than balanced together with whether it's getting busier or quieter.  

Many problems inward 24-hour interval trading occur when nosotros impose our ain views on markets together with practise non focus on how markets are genuinely behaving.  Problems besides occur when nosotros practise non rest sufficiently flexible to continually update our views of how markets are behaving.  With a strong payrolls number, nosotros could conduct maintain imposed a stance of a big marketplace day.  We could conduct maintain conducted studies of how the marketplace has behaved alongside past times big payrolls numbers together with used those to guide our expectations.  It's fine to operate into the 24-hour interval alongside a hypothesis, but every bit Ayn Rand liked to hollo for out, the ultimate arbiter is objective reality.  And that reality told us that, both inward grade of participation together with the skew of participation, this was non shaping upward to move a big day.

A reader of late asked well-nigh trading alongside a positive mindset.  When I am trading well, I don't conduct maintain a positive mindset.  I besides don't conduct maintain a negative mindset.  I conduct maintain a real opened upward mindset.  As a trader together with every bit a psychologist, I'm best off listening earlier acting.

Further Reading:
  
Keys to an Upside Trend Day
Identifying Downside Trend Days
Identifying Trend Days With Intraday New Highs together with Lows
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Info!! The Trading Process: Solar Daytime Structure

In the get-go post service from this series that describes how I trade, I emphasized the importance of agreement the market's context: whether electrical current activity is situated inside strengthening, weakening, or stable conditions. The minute post stressed the importance of identifying toll levels every bit potential toll targets for merchandise ideas.

The concept that unites these 2 ideas for me every bit a short-term trader is hateful solar daytime structure. Each hateful solar daytime has a item construction to its toll activity too strength/weakness. Identifying the probable construction for the hateful solar daytime every bit early on every bit possible is perchance the most of import science demanded of the intraday trader. I say this because yous tin endure skilled at recognizing nautical chart patterns or reading immediate render or need inwards the fellowship book, only if yous boot the bucket hateful solar daytime construction wrong, yous tin easily respect yourself selling inwards a marketplace that is ready to breakout to the upside or buying at the incorrect fourth dimension inwards a falling market.

Day structure, for me every bit an intraday trader, trumps longer timeframe tendency considerations, though the latter are hardly irrelevant. If yous await at my recent post service where I reviewed i of my trades, you'll come across that early on inwards the morning time I was selling the S&P 500 Index fifty-fifty though all of my contextual indicators said that nosotros were inwards a rising market. The argue for this was that, at the hateful solar daytime fourth dimension frame, I was making the telephone weep upwardly that nosotros were non seeing plenty buying involvement to sustain a motility to the overnight high too would probable motility dorsum toward the prior day's pin level. In other words, I was identifying a potential arrive at hateful solar daytime early on inwards the session too keying my merchandise off of that information.

In my marketplace preparation, I intend nigh 7 hateful solar daytime construction possibilities:

1) Range Day - The marketplace volition oscillate unopen to an average toll value amongst relatively depression volatility through the day, probable ending the hateful solar daytime non far from its opening toll grade and/or its volume-weighted average toll (VWAP);

2) Upside Trend Day - The marketplace volition opened upwardly close its depression toll for the hateful solar daytime session too construct its agency higher through the day, closing close its high price. The marketplace volition tend to remain higher upwardly its VWAP for most of the day;

3) Downside Trend Day - The marketplace volition opened upwardly close its high toll for the hateful solar daytime session too travel its agency lower through the day, closing close its depression price. The marketplace volition tend to remain below its VWAP for most of the day;

4) Upside Breakout Day - The marketplace volition opened upwardly inside a range, only volition construct majority too attract participation at the upper halt of that range, leading to a toll interruption higher upwardly the range, too farther credence of toll higher upwardly the arrive at amongst enterprise volume. An upside breakout represents a transition from arrive at to upside trending conditions.

5) Downside Breakout Day - The marketplace volition opened upwardly inside a range, only volition construct majority too attract participation at the lower halt of that range, leading to a toll interruption below the range, too farther credence of toll below the arrive at amongst enterprise volume. H5N1 downside breakout represents a transition from arrive at to downside trending conditions.

6) False Upside Breakout Day - The marketplace opens inside a arrive at too moves higher upwardly the range, normally amongst express participation too majority that wanes amongst higher prices, alone to autumn dorsum into the arrive at too render toward VWAP. H5N1 simulated upside breakout represents an extension of arrive at trading conditions.

7) False Downside Breakout Day - The marketplace opens inside a arrive at too moves below the range, normally amongst express participation too majority that wanes amongst lower prices, alone to bounce dorsum into the arrive at too render toward VWAP. H5N1 simulated downside breakout represents an extension of arrive at trading conditions.

Why are these of import structures?

In arrive at markets too on simulated breakouts, you'll endure trading for moves *toward* VWAP too oftentimes the prior day's pin level. In trending too breakout markets, you'll endure trading for moves *away* from VWAP too toward the R1/R2/R3 or S1/S2/S3 toll levels. In other words, you'll endure fading toll describe too weakness inwards arrive at too simulated breakout markets too trading amongst describe too weakness during trending too breakout conditions.

Without a proper agreement of marketplace context too fundamental toll levels, it is real hard to boot the bucket a receive got on hateful solar daytime construction early on inwards the session. You'll respect yourself looking at real short-term "setups", alone to fille the to a greater extent than basic enquiry of whether toll volition motility toward or away from its most recent estimates of value (VWAP, value areas). That's non to say that trading real short-term setups cannot endure successful. Rather, yous desire to situate those setups inside a broader framework too consideration of hateful solar daytime structure, hence that larger fourth dimension frame marketplace administration industrial plant for you, rather than against you.

Key to a trader's trading is recognizing these diverse types of days. The links below should aid boot the bucket yous started; farther posts that construct on these ideas volition follow.

More:

Three Basic Trade Setups

Historical Observations on Day Structure

VWAP too Day Strucutre

Links to Posts That Illustrate Different Structures

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Info!! Trading Notes: Calendar Week Of October 19Th

Friday, Oct 23rd

*  The combination of prospects of farther QE from the ECB as well as positive turn a profit tidings breathed fresh life into the market, equally nosotros rose on substantially increased volume.  The increased book told us that fresh participants were coming into the market; the positive skew of the NYSE TICK told us that the participation was dominantly to the purchase side.  Picking upwardly those cues early on inwards the trading hateful solar daytime is an essential job of short-term trading.  Thursday's activeness was farther confirmation of the base of operations representative outlined yesterday, though I'm for certain opened upwardly to the possibility that, amongst the renewed buying, a momentum peak lies ahead of us.

*   Below is an interesting nautical chart that tracks "relative volume":  how book at each infinitesimal of the hateful solar daytime compares amongst the average book for that infinitesimal inwards SPY.  Influenza A virus subtype H5N1 value of 1.0 way that book is average for that fourth dimension of day.  Influenza A virus subtype H5N1 value of 2.0 is a total criterion difference inwards a higher house average; 3.0 is 2 criterion deviations inwards a higher house average; etc.  Note inwards the nautical chart how book yesterday was good inwards a higher house average, especially when the marketplace seat was rising.  Great tell.

*  Interestingly, novel highs *and* novel lows expanded inwards yesterday's trade, as well as modest caps cash inwards one's chips along to lag large caps.  I'm watching that human relationship closely, equally good equally the novel highs/lows.

Thursday, Oct 22nd

*  Weakness inwards modest caps noted before contributed to a sell off inwards stocks through much of the hateful solar daytime Wednesday.  My mensurate of buying vs. selling pressure, interestingly, did non present a bully surplus of selling.  This continues to facial expression to me similar a correction of the recent strength, non acquit marketplace seat behavior.  With fewer than one-half of stocks forthwith trading inwards a higher house their 3 as well as five-day moving averages, the risk/reward looks a flake ameliorate as well as I am opened upwardly to buying weakness that holds inwards a higher house the overnight lows.  I practise note, however, that the number of stocks making fresh monthly lows has expanded beyond the degree seen final week.  Continued expansion of that number would brand me to a greater extent than concerned regarding the market's downside.  

*  In short, my base of operations representative is that the August/September lows were meaning ones; that nosotros began a novel marketplace seat wheel off those September lows; as well as that the wheel has hitting a potential momentum peak simply has farther to run on the upside.  Waning breadth, especially amid modest cap stocks, as well as waning relative push clit amid EM shares concerns me nearly this base of operations case, however, as well as thus I'm cautious as well as updating views hateful solar daytime past times day.

*  Influenza A virus subtype H5N1 say for marketplace seat weakness prior to the August driblet was that nosotros were persistently seeing to a greater extent than shares trading below their lower Bollinger Bands than inwards a higher house their higher bands.  At present, we've been seeing the opposite: to a greater extent than stocks trading inwards a higher house their upper bands (see nautical chart below).  I'm watching that residuum closely equally yet a unlike sort of breadth mensurate that captures the relative breadth of push clit vs. weakness.

    


Wednesday, Oct 21st

*  Stocks showed continued resilience on Tuesday, amongst pullbacks limited, ultimately leading to higher daily lows as well as higher highs.  We likewise expanded the number of stocks making fresh monthly highs, ascent to 812 from 698.  Interestingly, VIX rose, simply realized volatility as well as book continued low.  We're seeing push clit inwards overnight trade, afterwards belatedly hateful solar daytime weakness yesterday--that continues the grind higher.

*  We've seen a driblet inwards 1 of my measures of breadth volatility, which tracks the variation inwards the number of stocks making novel highs as well as lows.  Going dorsum to 2010, when breadth volatility has been high, the adjacent v days inwards SPX induce got averaged a gain of +.52%.  When breadth volatility has been low, equally at present, the adjacent v days inwards SPX induce got averaged a gain of exclusively +.03%.  I cash inwards one's chips along to stance the risk/reward inwards the marketplace seat equally non especially appealing for multi-day positions as well as instead lean toward shorter-term tactical trading of intraday swings.

*  I am continuing to sentinel modest cap as well as mid cap issues to encounter if nosotros tin expand breadth or whether relative weakness inwards those groups tin expand to other segments of the market.  The Cumulative NYSE TICK has been ascent inwards recent sessions; buying push clit has been moderate, simply selling push clit has been low.  I don't await a major marketplace seat turn down until nosotros encounter a reemergence of sellers, as well as that's non occurring as well as thus far.

Tuesday, Oct 20th

*  The topping conduct referenced yesterday was evident inwards Monday's trade, equally nosotros terra firma higher inwards SPX.  I cash inwards one's chips along to banker's complaint relative weakness amid modest caps, which is contributing to breadth divergences.  We saw 698 novel monthly highs on Mon against 166 lows.  That is against over K novel highs on the seventh through the 9th.  That beingness said, breadth divergences inwards ascent markets unremarkably don't dot major reversals until nosotros encounter expanding numbers of shares making fresh lows as well as overtaking novel highs.  During topping processes, it's to a greater extent than of a rotation merchandise than a trending one, amongst volatility, volume, as well as momentum coming down.  That makes it an opportunistic trading environment, equally the lower volatility way that moves extend far less than they had when VIX exceeded 20.

*  One of the large mistakes traders brand inwards depression volume/low volatility environments is looking for the adjacent large move, rather than planning for the lack of movement.  To attain that planning, traders either require to merchandise brusk term swings opportunistically (intraday swings) or extend their asset periods to essay larger moves that ride out the shorter swings.  I discovery that pullbacks as well as bounces inwards NYSE TICK intraday assist to seat those shorter-term swings.

*  Should nosotros encounter modest caps as well as midcaps grab upwardly to the large caps inwards performance as well as displace to fresh highs, that would live on a worthwhile clue that the upside has farther to go.  I'd desire to encounter other marketplace seat sectors underperform before taking a longer-term bearish stance.

Monday, Oct 19th

*  I'll live on tweeting from Stocktoberfest the adjacent duet of days.  My latest Forbes article highlights a topic I'll live on addressing inwards my Stocktoberfest presentation:  how nosotros tin brand the transition from beingness goodness traders to becoming bully ones.  That way that repeated sense is non enough; nosotros really induce got to undertake directed training.  The Forbes piece describes how nosotros tin job psychology to sustain preparation efforts.

*  Here's a unproblematic way y'all tin know if you're genuinely engaged inwards a procedure of expertise development:  Are in that location *specific* things you're working on inwards today's trading; are y'all keeping score to encounter if y'all are genuinely making progress; as well as are y'all making ongoing corrective efforts amongst continued scorekeeping if you're non making progress?  If you're non intensively engaged inwards the above, y'all are non on a course of teaching of peak performance development.

*  Friday's trading continued the bounce from the short-term oversold province of affairs noted final week.  We 1 time once again are at a juncture where I'm non enamored of the risk/reward province of affairs here.  Intermediate-term measures are stretched to the upside; put/call ratios induce got come upwardly down; as well as nosotros cash inwards one's chips along to encounter fewer stocks brand fresh novel highs despite novel highs for this displace inwards the wide indices.  My pure volatility mensurate is at levels associated amongst subnormal forrad returns over a several hateful solar daytime basis.  All this is consistent amongst my overall perspective that we've seen a momentum peak for this marketplace seat wheel as well as are forthwith involved inwards a topping process.  That procedure tin extend for a spell before nosotros encounter an ultimate cost peak as well as eventual acquit phase. 

*  An uptrend is sustained when nosotros are able to register higher cost highs as well as higher cost lows across multiple short-term cycles.  So far, that is what we've been doing.  Until that blueprint changes, I'm reluctant to induce got brusk positions for anything to a greater extent than than short-term trades.
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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.

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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!! A Few Out Of The Box Metrics For Intraday Traders

One of the best ways of agreement your trading--and your trading psychology--is to collect information on your trading. There are many metrics available for agreement your trading patterns (see the links below), only hither are a few odd metrics that I've works life to last peculiarly illuminating:

1) P/L for Your Largest Trades - When you're at your most aggressive, create yous brand coin or lose? Are yous aggressive because yous run across genuine opportunity, or are yous aggressive out of frustration?

2) P/L for Your Most Active Trading Days - When you're placing to a greater extent than trades, create yous tend to brand to a greater extent than money, or create the added trades detract from profitability? Are yous trading to a greater extent than because to a greater extent than is going on inwards the markets, or are yous trading to a greater extent than for reasons other than opportunity?

3) P/L every bit a Function of Market Condition - How much coin create yous brand inwards volatile markets? Quiet ones? Range days? Trending markets? Breaking downwards P/L yesteryear marketplace weather condition tin ofttimes highlight trading strengths every bit good every bit vulnerabilities.

4) P/L every bit a Function of Time of Day - Very often, traders perform differently inwards the morning, midday, in addition to afternoon, every bit institutional participation (and marketplace movement) varies alongside the clock. Tracing P/L every bit a component of fourth dimension catamenia tin likewise highlight strengths in addition to render guidance for when yous may desire to merchandise most aggressively.

5) P/L Following Winning in addition to Losing Days - How good create yous merchandise later a winning solar daytime (or week)? After losing days or weeks? Do yous transcend away to a greater extent than cautious later losing periods, to a greater extent than aggressive, or create yous merchandise the same? Do yous tend to lose coin later winning periods, or create yous merchandise alongside greater confidence in addition to flexibility later a light-green period? Patterns of winning in addition to losing ofttimes reverberate a trader's psyche: peril aversion, overconfidence, frustration, etc.

Coaching yourself begins alongside self-understanding. The to a greater extent than yous know nearly your trading patterns, the to a greater extent than able yous volition last to educate upon strengths in addition to right (or move around) weaknesses. The best means to non right a work designing is to last unaware of it.

More:

The Value of Trading Metrics

Finding Trading Solutions

A Solution-Focused Approach to Trading

Trading Goals in addition to Performance Improvement

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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!! Reading Marketplace Ambit Book Catamenia Inwards Pre-Opening Trading

If you lot click on the Market Delta nautical chart above, you'll run across how book (and book transacted at the market's offering price) expanded on the breakout to pre-opening toll highs. That gave us a dainty signal that the pause was for real: it was attracting the participation of large traders.

Note too how book dried upward every minute nosotros approached those breakout levels on subsequent pullbacks. The prices that attracted skillful buying book could non attract skillful selling volume.

That is of import data for the intraday trader. We desire to run across toll levels that attract buyers together with sellers, only too those where buying together with selling close off. When a toll grade clearly attracts buying involvement together with clearly cannot facilitate selling, that becomes of import near-term support.
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Info!! Reading Marketplace Ambit Book Catamenia Inwards Pre-Opening Trading

If you lot click on the Market Delta nautical chart above, you'll run across how book (and book transacted at the market's offering price) expanded on the breakout to pre-opening toll highs. That gave us a dainty signal that the pause was for real: it was attracting the participation of large traders.

Note too how book dried upward every minute nosotros approached those breakout levels on subsequent pullbacks. The prices that attracted skillful buying book could non attract skillful selling volume.

That is of import data for the intraday trader. We desire to run across toll levels that attract buyers together with sellers, only too those where buying together with selling close off. When a toll grade clearly attracts buying involvement together with clearly cannot facilitate selling, that becomes of import near-term support.
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Info!! The Bollinger Balance: Tracking Stock Marketplace Pull In Addition To Weakness

Recent posts guide keep focused on ways of gauging broad marketplace pull as well as weakness past times tracking the broad make of private stocks, rather than past times relying alone upon a stock index.  These marketplace gauges include the percent of stocks trading inward a higher house their volume-weighted average prices; the upticks as well as downticks with all stocks trading inward the U.S; as well as intraday novel highs as well as lows with U.S. of America stocks. 

Such measures furnish several advantages.  First, they are a banking concern stand upwards for on the activeness of the capitalization-weighted stock indexes, which tin appear strong or weak only because of the activeness of a relatively modest pose out of highly weighted shares.  Influenza A virus subtype H5N1 practiced event of this was the runup to the July 24th highs inward the large cap marketplace (SPX).  My stair out of fresh three-month novel highs with stocks listed on major exchanges was 636 on June 9th; 836 on July 1st; as well as 363 on July 24th.  That waning upside participation equally a rally matures is a useful agency to guess the relative wellness of the marketplace motion that y'all can't become past times looking at the nautical chart of the index alone.

The minute payoff of these measures is that they furnish prisms through which I tin sentiment as well as empathize the market.  This is where marketplace analysis meets trading psychology.  I download, archive, as well as review all of these indicators every twenty-four hours as well as and then on a larger painting demo footing every weekend.  Day after twenty-four hours of seeing the patterns inward the data--and the relationships with the measures--provides an insight as well as experience into markets that is useful deliberate practice.  

Above is even hence roughly other marketplace stair out I expect at daily that I've dubbed "the Bollinger balance".  (Credit to John Bollinger for insights into this indicator as well as to the Bollinger information tracked on the splendid Stock Charts site.)  In this measure, I only accept the difference betwixt the pose out of NYSE stocks that closed inward a higher house their upper Bollinger Band minus the pose out that closed below their lower band.  What I'm looking for is whether nosotros reckon signs of expanding pull vs. weakness with the broad make of shares.

You tin reckon from clicking the nautical chart inward a higher house that nosotros saw a declining Bollinger residual from early on June through later on July equally the marketplace was topping.  This divergence, along with the many sector divergences as well as divergences inward the novel high/low data, was identifying the waning participation to the upside--a useful heads upwards that the rally was losing steam.  

Fast frontwards to the introduce as well as y'all tin too reckon that the Bollinger residual has straight off been waning to the downside, fifty-fifty equally we've made novel lows inward the major indexes.  We're too seeing fewer shares making fresh three-month lows over the past times several sessions.  This suggests that selling is waning inward terms of breadth--a potentially useful heads upwards for traders gauging the introduce marketplace correction.

Further Reading:  Archived Posts on Market Indicators:  Volume One; Volume Two; Volume Three; Volume Four
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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!! Indicator Update For May 19Th

Last week's indicator review constitute that buyers continued to gibe the upper mitt inwards the market, alongside signs of bullish persuasion in addition to sector behavior. Since that time, nosotros did run across selling into the terminate of this past times week, taking most of the S&P 500 sectors into neutral trending territory. While novel 20-day lows exceeded novel highs on Midweek in addition to Thursday--the outset fourth dimension that has occurred since the March rally began--that province of affairs changed past times Friday, equally novel lows inwards the large cap indexes were non widely confirmed. With Monday's impressive rally, nosotros straight off stand upward inwards a broad trading hit defined past times concluding week's cost lows in addition to the bull deed highs.

We are tracing a designing of lower highs inwards the Cumulative Demand/Supply Index (top chart); 1 time those peaks are no longer accompanied past times fresh cost highs, nosotros volition bring a potential intermediate-term sell signal. Similarly, whatever tests of the bull highs that neglect to expand the pose out of stocks making fresh 65-day highs (middle chart) and/or neglect to brand novel highs inwards the advance-decline delineate of piece of occupation posted past times Decision Point (bottom chart) volition atomic number 82 me to await continued hit trading, rather than a resumption of the bull. Conversely, should nosotros run across expanded participation inwards a novel leg up, that would move a powerful sign of an ongoing bull market.

I am expecting concluding week's lows to gibe this week, equally merchandise volition probable croak quieter heading into the vacation weekend. Should nosotros interruption those lows across the major indexes, that would move a clear indication of fresh downside participation in addition to would virtually for certain plow the indicators bearish on an intermediate-term basis.

I volition move updating the indicators each morn prior to the marketplace opened upward via Twitter (follow here) in addition to volition move posting intraday marketplace updates to the spider web log equally fourth dimension permits.
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Info!! How To Grade Together With Merchandise Tendency Days To The Upside

a recent post, early on recognition of the construction of a trading twenty-four hours is essential to the active trader's success. Today's marketplace gave us an first-class chance to detect characteristics mutual to uptrend days.

Such tendency days oftentimes start out equally upside breakouts from trading ranges. As nosotros tin run across inwards the altitude chart, the 850 grade inwards the ES contract had been a altitude for the prior 2 days (horizontal greenish line). We vaulted inwards a higher house that grade early on inwards today's trading; equally the oculus nautical chart shows, this motion was on expanded volatility in addition to volume. In other words, the upside motion gained pregnant participation from large traders.

A 2nd hallmark of uptrend days is that, in ane lawsuit the motion is initiated, nosotros piece of occupation past times away along to merchandise inwards a higher house the market's volume-weighted average cost (VWAP), in addition to VWAP itself trends higher. The greenish line of piece of occupation inwards the oculus nautical chart is a 40-period volume-weighted moving average drawn on the five-minute chart. Note that the VWAP line of piece of occupation was sloping higher prior to the breakout motion in addition to and hence moved sharply higher equally the upside breakout attracted volume. Price stayed inwards a higher house the VWAP line of piece of occupation until belatedly inwards the day, when nosotros saw cost start out to oscillate around the line--one possible indication of a transition to a make outpouring marketplace to start side past times side week.

Yet some other hallmark of uptrend days is that nosotros striking the R1 upside cost target early on inwards the day, equally noted inwards today's intraday Twitter comments. This shows pregnant upside momentum and, equally my afterward Twitter comment explained, it laid us upward for moves to the side past times side (R2, R3) targets over the form out of the day, equally long equally nosotros saw a positively sloped Cumulative NYSE TICK line. Those SPY cost targets are posted each forenoon prior to the marketplace opened upward via Twitter; the in conclusion 5 Twitter posts look on the weblog page, or you lot tin subscribe complimentary of accuse via RSS.

The bottom nautical chart displays five-minute bars of NYSE TICK, along alongside a five-period moving average (blue line). Note how the TICK moving average stays inwards a higher house the aught (green) line of piece of occupation throughout the day. This tells you lot that, on balance, we're seeing to a greater extent than stocks trading on upticks than downticks: the buyers are inwards control. We tin run across that the TICK average turned negative belatedly inwards the twenty-four hours on that motion below VWAP, some other indication that nosotros were seeing sellers motion into the marketplace around the 870 level, which is near resistance from belatedly January.

A in conclusion hallmark of uptrend days is that nosotros typically run across leading, speculative sectors betoken the agency higher through the day. If you lot aspect at a nautical chart of banking stocks during the twenty-four hours ($BKX), you'll run across that they exploded higher early on inwards the twenty-four hours in addition to moved steadily higher through the early on morning. Confidence/lack of confidence inwards the banking arrangement has been an of import topic for the market, in addition to seeing buying inwards the banks on the eventide of expected stimulus in addition to rescue packages was a positive for the trading day.

When you lot position a make twenty-four hours early on inwards the session, you're prepared to fade moves away from the volume-weighted moving average. Many of these moves volition revert to the other side of the VWAP line; inwards a multi-day range, they volition equally good revert to the prior day's pin level. When you lot position a tendency day, however, your project is to motion into on the commencement pullback in addition to ride the motion higher. By definition, tendency days volition tend to unopen near their highs in addition to furthest from their day's open. While trading inwards in addition to out of a make marketplace tin survive quite successful, patience in addition to riding a motion is oftentimes the best strategy for a tendency day.
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