Info!! Putting This Marketplace Rally Into Perspective

I know when the bears are hurting, because out come upwardly the daggers for the primal banks.  I've been inward the concern quite a piece in addition to I've nonetheless to listen a trader attribute his or her profits to primal depository fiscal establishment manipulations.  

That beingness said, the ferocity of this rally has taken many traders yesteryear surprise, in addition to that sure includes me.  My most recent human face at marketplace position breadth suggested that marketplace position strength was genuinely expanding, non contracting equally it had done from much of June through September.  I suggested roughly give dorsum was to move expected, equally many of my measures were approaching levels associated amongst yesteryear momentum peaks, simply the tidings from Nippon on Fri entirely lifted stocks further.

Meanwhile, correlations in addition to volatility remain high--not what nosotros commonly meet when rallies are sputtering in addition to almost to plough over.  We are accustomed to seeing stocks autumn on increases inward volatility in addition to ascension on decreasing volatility.  In price of realized volatility--not the implied volatility mensurate of VIX--this has non been the case.  We conduct maintain rallied on actual toll volatility that is much greater than would commonly move expected at the electrical current degree of VIX.

While at that spot are clear risks to assuming "this fourth dimension is different", at that spot are likewise risks inward assuming that the hereafter volition faithfully replicate the past.  This rally has non been replicating recent ones, in addition to that is why I in addition to others conduct maintain been surprised.  In the past, a several 24-hour interval pullback during an uptrend has provided a reasonably proficient risk:reward entry for traders wanting to ride the trend.  Waiting for the pullback inward the electrical current marketplace position would conduct maintain meant missing the rally altogether.  Short-term overbought levels conduct maintain stayed overbought far to a greater extent than persistently than usual.  To give simply i example, nosotros conduct maintain had eleven forthwith trading sessions inward which to a greater extent than than one-half of all SPX shares conduct maintain unopen higher upwardly their three-day moving averages.

The higher upwardly charts puts this rally into perspective.  Note the cumulative trouble of upticks vs. downticks for all NYSE stocks (top chart) in addition to for all stocks trading on U.S. exchanges (including NASDAQ, NYSE MKT LLC, in addition to regional exchanges).  In both cases, nosotros meet a dramatic turnaround in addition to persistent buying across the wide arrive at of shares.  Interestingly, the broadest mensurate of TICK, representing all U.S. shares, has made the strongest comeback, reflecting renewed buying involvement amid smaller cap shares, which had been laggards.  

The bottom nautical chart shows the explosion of stocks making novel three-month highs vs. lows across all U.S. mutual stocks.  When looking at 52-week novel highs/lows, that mensurate is the strongest we've seen since slow 2013.  This reinforces the before determination that the electrical current marketplace position has been gaining strength, non topping out.

In short, the information back upwardly the notion that this is a fresh bull marketplace position leg, non a bounce inward a topping market.  If that is the case, nosotros tin human face farther toll gains, fifty-fifty afterward momentum has crested.  I volition move tracking the higher upwardly measures in addition to others to update the rally's trajectory.
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Info!! Trading Notes For The Calendar Week Of March 21, 2016

Friday, March 25th

*  Perhaps the most mutual psychological challenge I listen from traders is how to maintain a positive mindset during periods of drawdown.  It's rattling hard to lose coin for a stretch of fourth dimension when you're pouring your pump together with best efforts into markets.  But at that spot is no surer agency of missing opportunities than becoming self-focused together with negatively focused.  This recent article focuses on how nosotros tin sustain well-being together with a positive mindset fifty-fifty when everything seems to hold out going wrong.

*  Stocks bounced from their short-term oversold province of affairs noted yesterday amongst the swing overbought/oversold measure. I am watching breadth closely here, every bit it would non surprise me to run across a to a greater extent than selective stage of the marketplace wheel going forward.  The relative functioning of little caps is of item interest. 

*  I'm seeing increasing utter of straight monetary stimulus to economies.  I suspect this volition hold out actively considered if nosotros larn a renewed deterioration of fiscal weather together with concerns re: deflation.  The implications for asset prices (weak currencies, rigid commodities) would hold out significant.

*  I've been putting considerable function into a gear upward of swing measures that rail overbought/oversold weather together with volatility.  These are based on trial time, where each bar represents an amount of book or toll drive inwards the market, non a unit of measurement of chronological time.  The OBOS mensurate captures momentum together with value effects on a swing basis:  swing returns inwards ES convey been best when we're significantly overbought (+.54%) together with significantly oversold (+.49%).  Returns convey been subnormal betwixt these extremes (-.05%).  Although I bespeak to maintain the specifics of the mensurate proprietary together with express to the managers I function with, I'll happily update periodically on this blog.  Swing returns from electrical flow levels of OBOS together with vol convey non been significantly positive or negative.

*  Here is a swing volatility mensurate that looks at the volatility of the trial bars.  Note how we're close levels that convey lately corresponded to marketplace peaks.  This is yet roughly other argue I'm watching breadth closely.

Thursday, March 24th

*  Thanks to Aaron Fifield for interviewing me for the Chat With Traders podcast.  We demeanour on a set out of topics relevant to factors that brand for trading success.  He's assembled an first-class lineup of interviews worth checking out.

*  We've seen a recent pullback inwards stocks together with oil; yesterday's closed saw an expanded set out of stocks making novel lows amidst relative weakness amid little caps.  I volition hold out tracking breadth closely here, every bit nosotros mightiness hold out seeing a to a greater extent than selective stage of the recent marketplace strength.  Below is a nautical chart of stocks across all exchanges making fresh 3-month highs vs. lows:

*  I've been exploring a swing overbought/oversold mensurate based on trial bars.  As you lot tin see, we've lately entered oversold territory.  As long every bit these swing lows are occurring at successive toll highs, I'm willing to give the produce goodness of the doubtfulness to the bulls.  The nautical chart tracks the mensurate through the recent motion higher.

Wednesday, March 23rd

*  We saw an early on selloff due to the Brussels news, precisely this was bought relatively early on inwards the NY session.  It's a skillful trial of how, inwards a momentum environment, participants desire to larn long fifty-fifty on relatively little dips.  That beingness said, my breadth volatility measures (volatility of daily breadth numbers) has been coming downwardly together with that has led to subnormal returns over the near-term horizon.

*  Interestingly, we're hovering close our highs, precisely yesterday saw alone nigh 40% of SPX stocks trading inwards a higher house their 3-day moving averages.  During these momentum periods, corrections tend to hold out rotational together with we're seeing roughly of that.  Housing, financials, consumer staples, utilities--all convey been off their highs recently.  Technology has been stronger.

*  My wheel mensurate continues inwards elevated territory, in 1 trial to a greater extent than dissimilar much of what nosotros saw inwards 2015, where push clit led to weakness.  That continued elevation on a shorter-term wheel mensurate suggests that a longer-term wheel is at play together with that this has been to a greater extent than than a bounce inwards a demeanour market.

Tuesday, March 22nd

*  We're seeing roughly consolidation overnight next a little upward twenty-four hr catamenia yesterday.  While SPX closed higher, nosotros returned to underperformance of little caps together with the set out of stocks across all exchanges making novel monthly highs dropped from 1660 to 886.  New monthly lows likewise dropped, however, every bit we're soundless non seeing distinctive weakness inwards whatsoever sector.  Volume together with volatility dropped; VIX is forthwith below 14.  More on volatility below.

*  Below is a short-term mensurate of the set out of SPX stocks making fresh 5, 20, together with 100-day highs versus lows.  Notice how nosotros convey stayed elevated for a set out of consecutive days together with how this is different from what nosotros saw through much of 2015.  Whereas "overbought" readings were opportunities to sell concluding year, then far inwards this rising we're seeing momentum together with push clit leading to farther strength--one of the signature characteristics of a fresh marketplace cycle.

*  Despite the market's push clit together with momentum, the rally has non had a lot of fans.  I honour on the Stock Twits site, for example, that messages regarding SPY are 40% bullish, 60% bearish.  That ratio hasn't changed much during the concluding 2 weeks of gains.  I likewise honour that shares outstanding for the SPY ETF convey in 1 trial once to a greater extent than dipped, forthwith dropping below their levels from 5, 10, together with 20 days ago.  Very interestingly, the set out of shares outstanding for SPY has dropped over the course of pedagogy of the rally from mid-February.  Share redemption has to a greater extent than oftentimes than non been associated amongst superior returns over a multi-week horizon.

*  As mentioned above, volatility has dropped over the course of pedagogy of this marketplace rally.  Equally notably, my pure volatility mensurate (volatility per unit of measurement of trading book for the ES futures) has dropped significantly (see below) together with is getting to levels that convey been seen at recent marketplace highs.  I am rattling opened upward to the possibility that we're going into a different stage of the marketplace wheel where we'll run across lower volume, less drive per unit of measurement of volume, together with to a greater extent than of a grinding trade.  For traders accustomed to the drive that nosotros saw for the starting fourth dimension duet of months of this year, that transition to a depression vol authorities tin hold out challenging, requiring a fresh approach to setting targets, stops, together with asset periods.

Monday, March 21st

*  So often, inwards our trading goals, it's gear upward together with forget.  We gear upward goals, precisely oftentimes neglect to follow through.  This article draws upon recent research to position how tin nosotros transcend away to a greater extent than productive--better at pursuing together with reaching the goals that nosotros define.

*  Stocks closed higher overall on Friday, together with we're forthwith seeing over 90% of SPX shares trading inwards a higher house their 20- together with 50-day moving averages.  That is odd push clit off the Feb lows.  My mensurate of upticks versus downticks amid NYSE stocks (NYSE TICK) showed corporation push clit on Fed twenty-four hr catamenia and, every bit the nautical chart below shows, has been inwards an uptrend on a cumulative basis, eclipsing its previous high.  I believe we're pricing inwards a to a greater extent than favorable surroundings for equities, given QE overseas together with a moderating Fed.

*  Yet roughly other agency of tracking the push clit together with weakness of shares is to await at each stock on the NYSE together with run across if it has closed inwards a higher house or below its Bollinger Bands.  (Raw information from Stock Charts).  As the nautical chart below shows, nosotros convey reversed the blueprint of internet weakness from 2015 together with early on 2016 together with convey been persistently inwards a higher house the naught line of piece of job inwards recent days.  Bottom line, I'm non seeing the sort of deterioration that would ordinarily precede a major marketplace reversal.

*  H5N1 spell dorsum I mentioned the shares outstanding inwards the SPY ETF every bit a useful thought approximate together with noted that it had been flashing bearish sentiment, fifty-fifty afterwards the liftoff from the Feb lows.  Sure enough, history repeated together with nosotros continued higher.  Now we're seeing an expansion inwards shares outstanding (net bullish sentiment).  In the by that has led to subnormal returns for SPY.
   

Info!! Trading Notes: Calendar Week Of 8/17/2015

Friday, August 21st

*  It was a 2d right away twenty-four hr menses of real weak book flows; the failure to sustain bounces was evident relatively early on inwards the twenty-four hr menses in addition to quite telling, every bit the gain marketplace gave way to a trending trade.  Stocks making fresh novel lows expanded in addition to almost 600 NYSE issues unopen below their lower Bollinger Bands.  Interestingly, when that has happened inwards the past times year, at that topographic point has tended to move farther downside over the adjacent v trading days.  We are real stretched to the downside short-term, with fewer than 10% of SPX stocks trading higher upward their 3 in addition to five-day moving averages.  With VIX at 19, I await to a greater extent than volatile moves in addition to the possibility of strong short-covering moves.

*  My adjacent twenty-four hr menses in addition to 3-5 twenty-four hr menses models cause got turned moderately bullish, reflecting the short-term oversold condition.  Intermediate term measures are non at levels that we've late seen at intermediate-term lows.  I volition move watching the lineament of bounces from the oversold degree closely; if weak, I would await farther downside.  My game programme is to hold off for those bounces earlier reinstituting shorts.  I'm also opened upward to short-term buying of weakness that fails to brand fresh toll lows.

*  Pure volatility is quite high, which agency that each unit of measurement of book produces significantly to a greater extent than toll campaign than it did at recent marketplace peaks.  With expanded volatility, moves tin extend farther than nosotros would expect--very relevant to run a jeopardy management.

Thursday, August 20th

*  Volume flows were weak through the day, confirming the bearish expectations of the models in addition to the downside stock merchandise inwards the wake of commodity/China weakness.  This weakness has carried forrad to premarket trade.  Short term indicators are at levels stretched to the downside, but intermediate-term ones are not.  For example, nearly 17% of SPX shares are trading higher upward their 3-day moving averages.  That creates an surroundings ripe for a counter-trend bounce.

*  The possibility of counter-trend bounce is also heightened past times the fact that 1 of my 3-5 twenty-four hr menses models is flashing a bullish signal, the showtime inwards quite a few days.  Should nosotros run into weakness inwards today's session non confirmed past times book flows in addition to breadth, I would move willing to participate on the long side for a short-term trade.  

*  Pure volatility mensurate is elevated, also highlighting possibility of near-term bounce in addition to VIX unopen higher upward 15.  Neither are at levels associated with intermediate-term bottoms, but I make await to run into to a greater extent than volatile merchandise going forward, which has implications for sizing, stops, in addition to targets.

Wednesday, August 19th

*  Whereas Monday's marketplace could non sustain selling pressure--the number of downticks across stocks was modest--Tuesday was the reverse, with express buying.  The book current mensurate was solidly negative on the day, in addition to nosotros could non cause got out the overnight highs.  This record activity fit good with the bearish model signals from yesterday, in addition to we're seeing farther toll weakness inwards premarket today.  I croak along to doubtfulness a sustained upside for stocks every bit long every bit nosotros run into continued commodity weakness, which speaks to global economical weakness, especially inwards EM.

*  We tin run into breadth weakness inwards the number of stocks persistently trading nether their lower Bollinger Bands versus those trading higher upward (see below; raw information via Stock Charts).  Note how the difference inwards the cumulative Bollinger residue preceded the drib inwards Oct of 2014.  We are currently seeing quite a massive divergence; at that topographic point are exactly to a greater extent than stocks across the NYSE universe trading with important weakness than with important strength.

*  Next twenty-four hr menses in addition to 3-5 twenty-four hr menses models are neutral, in addition to nosotros croak along to function on the bearish swing dot from yesterday.  Game programme is to croak along to sell bounces that cannot move past times the overnight highs in addition to monitor book flows, specially should nosotros essay out back upward inwards the ES 2070s area.  Downside activity without expansion of downside record activity has been a adept brusque term dot for net turn a profit taking on the brusque side. 

Tuesday, August 18th

*  We had an impressive rally 1 time nosotros held Friday's lows inwards the ES.  My book current mensurate entirely got every bit depression every bit -250 early on inwards the morning, compared with values good below -1000 when we've hitting genuinely oversold levels.  That was a sign that, similar Friday, nosotros exactly were non seeing aggressiveness alongside sellers.  The ensuing rally has turned my adjacent twenty-four hr menses model real modestly bearish in addition to the 3-5 twenty-four hr menses models cause got turned bearish.  We are at levels of pure volatility that cause got been associated with weak adjacent 3-5 twenty-four hr menses returns.  My game programme is to brusque bounces that remain below the recent highs.  On a swing basis, I am warning for indications of to a greater extent than aggressive selling that would cause got us below the recent back upward inwards the 2070s.  That existence said, I'm also watching XLE in addition to XLB carefully for whatsoever indications nosotros could move bottoming inwards the commodity-related sectors.  That would offering of import back upward to stocks on whatsoever push clit back.

*  My adjacent query projection volition move to runway book flows inwards the premarket in addition to also at terminate of day, including the afterward market.  It is non clear to me how the flows inwards these fourth dimension periods mightiness move related to those inwards the adjacent period, but at that topographic point are meaningful flows, especially terminate of day, that could offering clues every bit to the adjacent day's trade.

Monday, August 17th

*  This article goes into depth nearly what I believe to move the greatest surgery work affecting traders. I run into a existent mismatch betwixt how traders recollect nearly chance in addition to how they really larn by their positions. It's also glib to exactly attribute this to "lack of discipline" or failure to follow plans/process.  Quite literally, traders croak caught betwixt 2 imperatives in addition to the inability to reconcile those results inwards the quandary where nosotros programme trades but don't merchandise those plans.

*  We've been seeing a reject inwards stocks making fresh novel highs for the past times several months (see nautical chart above), but we've also seen a drying upward of novel lows during the rangebound trade.  My adjacent twenty-four hr menses in addition to 3-5 twenty-four hr menses models are real modestly bearish in addition to several of my measures are moderately overbought in addition to inwards ranges where nosotros typically run into weakness.  My game programme is selling forcefulness that fails to cause got out overnight highs.

*  Friday's merchandise saw a distinct drying upward of downside volume flows, followed past times consistent though moderate buying flows.  Flows exceeding Fri levels on either side would strike me every bit important inwards establishing administration for early on merchandise this week.  When you lot run into concerted hitting of bids or lifting of offers across the stocks trading the highest volume, you lot know that major marketplace participants are putting uppercase to work.  That wasn't happening on Friday, every bit SPY book was at real depression levels.  Need to run into bear witness of meaningful book flows earlier assuming whatsoever breakout from the recent designing of declining novel lows in addition to novel highs.
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Info!! Trading Notes: Calendar Week Of September 14Th

Friday, September 18th

*  In a feel for stocks, non a lot changed with the Fed meeting, every bit a hike is nevertheless inwards play for after this year, but fiscal weather are non justifying a hike at this time.  We traded inwards a higher house the recent hit in addition to since require maintain fallen dorsum into the range, every bit we're straightaway intermediate-term overbought.  Selling buying forcefulness inwards NYSE TICK that cannot generate fresh cost highs is my full general approach going forward; models modestly bearish.

*  This posting is belatedly inwards exercise because of my participation inwards a podcast for the Better System Trader site.  Do depository fiscal establishment correspond out their podcast page; it's an fantabulous laid upwards of resources.  Will link my podcast when it's upwards early on this coming week.

Thursday, September 17th

*  We saw modest buying pressure level early on inwards the session on Wednesday, followed yesteryear a notable absence of selling interest, with NYSE TICK largely staying inwards a higher house the -500 level.  This was significant, given that nosotros were trading at a short-term overbought grade nigh a hit high.  Unlike inwards previous situations, those weather did non convey out sellers, in addition to the termination was an upside breakout on rigid breadth.  It was a dandy example of how indicators in addition to models tin alarm traders to directional tendencies, but it is genuinely the record activeness that makes for practiced intraday trades.

*  I straightaway present over 70% of SPX stocks inwards a higher house their 20-day moving averages in addition to good over 80% inwards a higher house their 3, 5, in addition to 10-day averages.  While my models propose the likelihood of pullback over a 3-5 twenty-four hours horizon, activeness clearly volition survive dominated yesteryear perceptions of the Fed determination in addition to charge per unit of measurement guidance after today.

*  Given the dubiety of the consequence of the Fed coming together in addition to the odd attending placed on this meeting, I hold off considerable volatility surrounding the proclamation in addition to press conference.

Wednesday, September 16th

*  We did indeed agree recent lows on early on selling pressure level on Tuesday, leading to a company rally toward the hit highs.  We're overbought across a give away of the measures that I follow; the nautical chart below tracks the per centum of SPX stocks trading inwards a higher house their 3, 5, 10, in addition to 20-day moving averages (raw information from Index Indicators).  In general, when a minority of stocks are trading inwards a higher house their 100-day averages, my models indicate to subnormal returns when short-term breadth is rigid in addition to superior returns when short-term breadth is weak.  My leaning is to sell bounces that cannot accept out the overnight in addition to previous day's highs.

*  I'm hearing quite a dispersion of views regarding what the Fed mightiness do tomorrow, which leads me to believe a reasonable proportion of traders volition perceive themselves to survive offsides.  That could contribute to meaning volatility.  I was surprised yesteryear the relatively depression index in addition to equity put/call ratios yesterday; both were the lowest inwards the yesteryear 2 weeks.  That has tended to Pb to subnormal returns over a side yesteryear side 3-5 twenty-four hours horizon.

Tuesday, September 15th

*  We saw cyberspace selling flows on the twenty-four hours Monday, but it was a tranquillity vacation merchandise in addition to nosotros held inwards a higher house the recent back upwards around ES 1928-1930.  New monthly highs expanded to 306; lows dropped to 298, across all exchanges.  So piece at that topographic point was cyberspace selling pressure, breadth did non deteriorate.  That unremarkably has me looking for a bounce, peculiarly if nosotros tin agree the overnight lows inwards early on merchandise today.  One of my models is modestly bearish; 1 modestly bullish--not odd to acquire weak in addition to indecisive signals inwards a hit market, every bit the models pick upwards overbought in addition to oversold extremes.  I suspect nosotros could reckon a continuation of the hit merchandise going into Thursday's FOMC meeting.

*  Below is a nautical chart of an 80-period charge per unit of measurement of modify mensurate for ES, where each stream represents 50,000 contracts traded.  I've constitute overbought/oversold measures that normalize for book traded to survive quite helpful inwards putting overnight activeness into context in addition to adjusting to faster in addition to slower marketplace position conditions.  We're bouncing off an oversold condition; I'm watching the lineament of this bounce carefully.

*  The CBOE $SKEW mensurate is at its highest grade inwards a while.  That way that out of the coin seat options are existence bid upwards ahead of the Fed.  Interestingly, as I noted a piece back, skew is non necessarily a reverse indicator.  Near-term returns next high skew readings require maintain been subnormal.

Monday, September 14th

*  What I reckon with successful traders is a network of successful relationships.  There is merely besides much to follow inwards markets to merchandise inwards a completely siloed fashion.  That is why fifty-fifty independent traders in addition to solo portfolio managers cultivate rigid information networks in addition to back upwards systems.  There is a cardinal to edifice rigid relationships that I lately wrote about; ultimately it's a critical exercise of one's long-term border inwards markets.  The strongest individuals acquire that way yesteryear cultivating rigid teams.

*  My models are modestly bearish over a 3-5 twenty-four hours horizon, but I hold off the week's trading to survive dominated yesteryear Thursday's Fed meeting.  The signals I'll survive taking volition survive largely intraday in addition to tactical upwards to that point.  The setups that require maintain worked best lately require maintain been periods of buying/selling that dry out upwards earlier making a fresh novel high or low--it's a blueprint mutual to hit markets.  I exercise NYSE TICK every bit a proxy for buying in addition to selling interest; also the percentages of stocks trading inwards a higher house their short-term moving averages.

*  Not everything is trading weak, every bit a savvy trader pointed out to me over the weekend.  Fully 32% of SPX stocks are trading inwards a higher house their 20-day moving averages, non in addition to then bad after the variety of driblet nosotros had inwards August.  Homebuilders (XHB) require maintain been notably strong, every bit require maintain been some of the tech leaders similar AMZN. I noticed a give away of bearish articles inwards fiscal media the final yoke of days.  Very hard to honor people inwards an chance mindset.  While I do retrieve nosotros could reckon follow through weakness, I do retrieve lineament companies with security dividends volition transcend on to facial expression practiced inwards a the world that remains largely inside QE regimes.

*  Despite a bounce inwards stocks on Friday, nosotros had exclusively marginally to a greater extent than monthly highs on the twenty-four hours (237 vs. 213 across all exchanges) in addition to to a greater extent than monthly lows (368 vs. 305).  I am watching breadth closely for clues every bit to management of the eventual breakout from the recent trading range.  

Info!! Trading Notes: Calendar Week Of 8/24/15

Friday, August 28th

*  Buying weakness yesterday ended upwards beingness a useful strategy for much of the day, exactly a potent selloff as well as and thus buying reversal inward the concluding 2 hours of the trading session made for volatile trading.  I hold to await these volatility aftershocks to endure amongst us, equally noted inward Wednesday's post.  That beingness said, the pure volatility mensurate has been mostly trending downwards over the yesteryear several sessions, though it's yet at historically high levels.  

*  The blueprint of improving breadth has continued.  Interestingly, nosotros had 131 stocks across all exchanges register fresh novel monthly highs as well as 136 brand novel lows.  That novel depression figure compares amongst 726 as well as 840 during the prior 2 sessions as well as 3553 at what appears to endure a momentum low.  As long equally nosotros encounter higher prices, potent NYSE TICK readings, as well as improving breadth, my game innovation is to purchase weakness, specially if it tin arrive at the axe concord higher upwards the overnight lows.

*    Pertinent to the number of declining, exactly yet high volatility, is the pass upwards inward book inward SPY over the yesteryear several sessions.  We peaked at 507 1 chiliad m shares traded on Monday, as well as thus roughly 369, 339, as well as 275 1 chiliad m the yesteryear iii days.  One of my quant routines estimates the probable day's arrive at (very helpful for establishing cost targets on trades), amongst book equally a major input.  By seeing how today's book unfolds, nosotros tin arrive at the axe approximate the probable day's book as well as brand informed estimates equally to probable cost arrive at for SPY.

*  H5N1 mensurate of the breadth of marketplace position clit that I rails daily is the number of NYSE shares that arrive at purchase vs. sell signals for diverse technical measures.  Yesterday nosotros had 520 purchase signals vs. 20 sells for the Parabolic/SAR measure.  We've had xi occasions where we've had over 400 purchase signals on that mensurate since June, 2014, when I began collecting the data.  Three days later, SPY has been upwards viii times, downwards 3 for an average gain of +.49%.  It's equally good pocket-size a sample to hang our hats on, exactly does serve equally a overnice reminder that potent upside thrust leading to a short-term overbought province of affairs (over 90% of SPX stocks are higher upwards their 3- as well as 5-day moving averages) does non necessarily atomic number 82 to "mean reversion".

Thursday, August 27th

*  Per yesterday's post, nosotros did indeed encounter a seek out of lows inward Wednesday's session, followed yesteryear important buying.  The NYSE TICK has provided really practiced tells for the recent marketplace position action, equally wide downticking was followed yesteryear wide upticking really early on inward yesterday's rally.  That clit has continued into the overnight, all of which is consistent amongst the view of having position inward a momentum depression per Tuesday's comment.

*  Another practiced state inward yesterday's merchandise was the continued drying upwards of the number of stocks making fresh novel lows on weakness.  We had 726 monthly lows across all exchanges yesterday versus 840 on Tuesday as well as 3553 (!) on Monday.

*  The pure volatility mensurate continues at high levels, suggesting that book as well as volatility powerfulness endure amongst us for a while.  We remain higher upwards xxx inward VIX, off the highs exactly significantly elevated relative to close of 2015.

*  I notice that the psychological issues faced yesteryear traders inward this recent marketplace position are related to difficulty adapting to the recent changes of trend, correlation, as well as volatility.  Per the recent Forbes article, a big purpose of emotional upheaval inward trading comes from the mismatch betwixt the patterns we've operate out accustomed to seeing inward markets as well as the novel patterns that are playing themselves out inward electrical flow marketplace position action.

*  I regime annotation that 89% of SPX stocks are right away trading higher upwards their three-day moving averages, exactly alone a piffling over 2% are trading higher upwards their 10-day averages.  I await that latter number to growth significantly, equally our correction from the recent weakness plays itself out inward fourth dimension equally good equally price.  My game innovation is to endure opened upwards to buying weakness equally long equally nosotros remain higher upwards the overnight lows.

Wednesday, August 26th

*  The pause of the 1920 degree inward ES referenced yesterday showed us that the mainland People's Republic of China cutting was non a game changer, as well as nosotros continued the volatile downward market.  Interestingly, fewer stocks made fresh novel lows yesterday relative to the twenty-four hours previous.  Specifically, nosotros had 3553 monthly lows across all exchanges 2 days agone as well as alone 840 yesterday.  This would endure consistent amongst having position inward a momentum low, which on major declines tin arrive at the axe precede ultimate cost lows yesteryear weeks or fifty-fifty months.  

*  Yesterday nosotros had fewer than 5% of all SPX stocks trading higher upwards their 3, 5, 10, 20, as well as 50-day moving averages.  Going dorsum to 2006, at that spot bring alone been iv occasions inward which we've seen similar wide weakness:  10/7 as well as 10/9 of 2008; 11/20 of 2008; as well as 8/8 of 2011.  Over the adjacent iii trading days, SPY moved -9.74%; 9.68%; 13.95%; as well as 4.75%, respectively.  Note the really high volatility going forward.

*  Note also that the dates higher upwards did non brand ultimate cost lows for a number of months, exactly ultimately led to major bull marketplace position moves.

*  I am warning for the possibility of our putting inward lows close term as well as am watching that 1830-1850 degree inward ES closely.  I would await the combination of brusk roofing as well as value buying inward the high volatility surround to create a major snapback rally from these really oversold conditions.

Tuesday, August 25th

*  The volatility warning proved useful for Monday's trade, equally nosotros blew out to a VIX of forty yesteryear the unopen as well as traded amongst a daily truthful arrive at inward excess of 8%.  We traded good off the day's lows, inviting the hypothesis that we've seen a momentum depression for this downwards move.

*  Contributing to the view of a momentum depression is the unusually broad, weak breadth.  Over 400 SPX stocks made fresh 20 twenty-four hours lows yesterday.  We haven't seen that form of wide weakness since early on August, 2011.  That indeed was a momentum low, exactly regime annotation that stocks drifted lower, albeit amongst fewer stocks registering novel lows, for a yoke of months after that.

*  I volition endure watching commodities closely, equally these bring been a useful warning for EM equity weakness as well as weakness inward States of America stocks.

*  I volition also endure watching the ES 1920 area, equally that was the close recent depression prior to the mainland People's Republic of China statement of a reserve ratio cut.  If that displace yesteryear mainland People's Republic of China was a game-changer, that degree inward ES should hold.  Game innovation is to purchase weakness that holds higher upwards that 1920 level.

Monday, August 24th

*  There's a really primal betoken toward the destination of the recent Forbes article:  many times what nosotros translate equally a trading occupation genuinely represents *information*.  For example, the trader who has difficulty pulling the trigger may really good intuit that the marketplace position surround has changed as well as that what had been practiced risk/reward may non endure thus at the moment.  Similarly, frustration could endure a really practiced early, emotional signal that regimes bring changed.  We pass a lot of fourth dimension trying to preclude as well as fighting emotions inward trading when mayhap nosotros should endure focused on learning from them.

*  With honour to the recent article, also regime annotation the v things I facial expression for to position changing regimes.  Very helpful inward adapting to marketplace position conditions.  These volition endure relevant 1 time we're cook for the conduct to turn.

*  We hold to encounter cost behaviour that is wildly unlike from what nosotros seen through close of 2015.  For example, from midnight to viii AM EST thus far today, we've printed 150 bars based upon 500 ticks of cost movement.  By contrast, on the Mon 2 weeks ago, from midnight to viii AM nosotros printed half-dozen such bars.  My pure volatility mensurate continues to brand novel highs, important that we're getting to a greater extent than crusade from to a greater extent than volume, exactly also to a greater extent than crusade per unit of measurement of volume.  This makes gamble management tricky, equally nosotros tend to rely on the same fourth dimension frames for asset periods without realizing that asset a merchandise for a sixty minutes right away is similar asset for a twenty-four hours before inward the year.

*  We closed Fri amongst fewer than 5% of SPX stocks trading higher upwards their 3, 5, as well as 10-day moving averages.  That form of wide short-term weakness has been to a greater extent than typical of 2010 as well as 2011 markets than recent ones.  Very often, when we've had such wide weakness, the showtime thrust downwards has been followed yesteryear farther weakness, which is what we've seen overnight.  I hold to favor selling bounces until there's approximately evidence that selling pressure level cannot hold to yield weakness across the vast bulk of sectors.
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