Info!! Stock Marketplace Scope Sentiment: A Hold Back At Muted Coin Flows

Recall that coin menstruum takes the dollar book of each stock transaction (price times volume) too adds that to a cumulative amount if the merchandise occurs on an uptick; subtracts it from the amount if the merchandise is on a downtick. Because this is a dollar volume-weighted Cumulative TICK, it is designed to capture the buying too selling influence of large trades and, therefore, large traders.

When nosotros add together the coin menstruum from all the stocks inwards an index or sector, nosotros tin assess the buying too selling thought for the broader market. The transcend nautical chart shows that the coin menstruum for the Dow Industrial stocks is off its early on Jan high, but every bit good well off its comport marketplace set lows. While the marketplace set has non been able to sustain the buying involvement to sustain a bull marketplace set move, neither receive got nosotros seen intense selling pressure.

An interesting perspective from the bottom nautical chart is the four-day moving average of the Dow coin flow, which is neutral every bit of Friday's close. Note how the four-day average oscillates simply about the red, cipher line. Those oscillations receive got lost aAmplitude every bit the marketplace set has been attain jump too every bit VIX has been cutting close inwards one-half from its comport marketplace set peak. That tells us that we're seeing less intense thought on both the buying too selling sides, which of shape has been helping to sustain the attain market. I volition live on looking for whatever alternative upwards inwards the magnitude of the coin menstruum numbers every bit i clue every bit to eventual breakout from the marketplace set range.
.

Info!! Is This Stock Marketplace Rally Gear Upwards To Gyre Over?

Recent looks at breadth too sentiment too the pull of the marketplace rally suggested that the electrical flow displace higher inwards the U.S. stock marketplace was different recent ones, with meaning upside momentum.  So far, that has proven to last the case.  Let's forthwith update the view.

First, however, a quick review of basics:  Market cycles typically stimulate down with a liftoff from lows on real rigid breadth too momentum.  As the upward stage of the cycle matures, nosotros stimulate down to encounter increasing differentiation with stock sectors, with the strongest continuing higher too the weaker ones diverging.  During this maturation, volumes tend to drib and, with them both volatility too correlation.  During the to a greater extent than mature phases of a cycle, the intensity of buying pull per unit of measurement area wanes, but selling pull per unit of measurement area also remains low.  It is when selling pull per unit of measurement area picks upwards that nosotros stimulate down an actual downwards stage to the cycle.

One of the ways I runway the cyberspace buying too selling activity inwards the stock marketplace is through the cumulative upticking vs. downticking of a broad diversity of shares.  You tin give the sack intend of this equally an instantaneous advance-decline line, where every transaction across every stock is counted equally a purchase (uptick) or sell (downtick).  When the cumulative business moves steadily higher, nosotros convey rigid cyberspace buying interest.  When it flattens out, nosotros know that a greater residual of buying too selling is present.

Please authorities annotation that the chore of a trader is non to shill for the bull or comport side of the market.  Rather, the trader's chore is to accurately assess what the marketplace is doing forthwith too conform to the surroundings that is presented.  Grounding a see of the surroundings inwards a broad diversity of information is a agency of staying cognitively too emotionally grounded too avoiding, equally much equally possible, biases inwards one's desires for upward or downward movement.  Some of the best tools for trading psychology are tools for accurate marketplace analysis.

The top 3 charts stand upwards for the cumulative upticking vs. downticking for all NYSE shares (top chart); all U.S. stocks traded on major too regional exchanges (second chart); too the Dow thirty stocks (third chart).  (Data obtained from e-Signal).  This gives us 3 perspectives, from the large caps (Dow stocks) to the broad marketplace (NYSE stocks) to the entire stock universe (U.S. stocks).  Note that all 3 display a notable sudden upward trajectory from the Oct lows.  Quite simply, buying involvement has consistently outweighed selling interest, too that has non abated.  From that perspective, the rally is quite intact.

Does that hateful all is rosy inwards the stock universe?  Not quite.  As the bottom nautical chart illustrates, fewer shares convey been closing to a higher house their upper Bollinger Bands equally we've moved higher recently.  Similarly, fewer shares convey been registering fresh novel highs vs. lows.  For example, nosotros unopen at a novel high on Thursday, but alone 897 mutual stocks across all exchanges registered fresh monthly highs.  Just a few days earlier, on Oct 31st, nosotros rang upwards 1975 novel monthly highs.  We're exactly starting to encounter to a greater extent than or less divergences inwards the upside activity of stocks, with Russell too NASDAQ shares lagging the SPX of late.

Such divergences tin give the sack proceed for a spell during the maturation stage of a marketplace cycle, then I don't hold off whatever novel comport leg inwards the immediate future.  It is when nosotros encounter cumulative selling involvement offset to equal too laissez passer on buying pull per unit of measurement area that nosotros know that a cycle is getting long inwards the tooth.  The top 2 charts illustrate that quite nicely during the September topping.  Nothing similar that is happening quite yet, but nosotros are seeing glimmers of differentiation inwards the patterning of marketplace strength.

Further Reading:  Measuring Buying too Selling Power inwards the Stock Market
.

Info!! Trading Notes For The Calendar Week Of March 14, 2016

Friday, March 18th

*  Steve Spencer of SMB emphasizes that cost activity next a catalytic lawsuit provides us amongst of import information.  This is especially truthful when nosotros run across a modify inwards the distribution of transactions next a word lawsuit or other catalyst.  Increased book together with a novel skew of book lifting offers versus hitting bids, for example, tells us that fresh buying flows receive got come upwards into the market.  This calls for an updating of our views of the stock or index.

*  This lesson has been especially relevant inwards the wake of the Fed announcement.  My cumulative stair out of upticks vs. downticks has hitting novel highs for this displace together with breadth, which had been waning, vaulted to novel highs.  Below nosotros tin run across the nautical chart of stocks across all changes making fresh 3-month novel highs vs. lows.  The vigor of buying next the Fed annunciation suggests that this, indeed, was a game changer.  Central banks globally are opting for accommodation and, historically, that has been favorable toward stocks.

*  The China/deflation thesis, which dominated give-and-take during recent marketplace weakness, is far less discussed I find, given stone oil clit together with USD weakness.  For stocks, inwards a negative involvement charge per unit of measurement world, anything rubber amongst yield continues to discovery interest.

Thursday, March 17th

*  Interesting commentary on the fright of missing marketplace moves from Victor Niederhoffer.  Many a bad merchandise is made because of the ego, non because of the objective marketplace opportunity.

*  We saw a ascent to novel highs on the heels of the Fed announcement, amongst enterprise buying interest.  Recent posts receive got commented on weak breadth and, for the marketplace overall, the breadth movie did non amend despite the Fed-related strength.  Across all exchanges, nosotros saw 753 novel monthly highs against 254 lows.  The latter is in 1 lawsuit again an uptick inwards novel lows together with the novel highs are one-half of what nosotros saw 2 weeks ago.  Among SPX shares only, stocks making fresh 100-day novel highs versus lows did expand to a marginal novel peak.  Much of the weakness is amid small-scale cap shares, though fiscal together with wellness aid stocks inside SPX are likewise lagging.  With the mixed breadth picture, I'm non surprised to run across some retracement of yesterday's gains inwards premarket merchandise today.

*  Breadth issues notwithstanding, it's clear that this has been a vigorous bull displace from the Feb lows.  Note below how we've stayed "overbought" on my multiperiod clit stair out (daily tracking of SPX stocks making 5, 20, together with 100-day novel highs versus lows) for a number of days.  This exclusively occurs inwards trending markets.  While the breadth issues oft precede correction, my base of operations illustration is to sentiment such a correction equally a buying opportunity.  

 

*  I'm working on creating a cycle-based stair out of short-term momentum together with value effects inwards the ES market.  The thought is to seat when markets are most probable to proceed versus opposite their most recent directional movement.  Interestingly, the market's ascent yesterday occurred on a depression value of the momentum measure.  More to come upwards on this research.

Wednesday, March 16th

*  Jim Dalton, who has pioneered trading via Market Profile, is offering his in conclusion mentorship computer programme earlier his retirement.  I likewise run across Terry Liberman will live doing a webinar amongst Jim afterwards today.  When I taught an internship computer programme inwards Chicago many years ago, Jim's piece of occupation was the exclusively mandated reading.  I proceed to discovery Market Profile helpful equally a conceptual framework for thinking nearly marketplace behavior.

*  After some early on weakness, nosotros saw buying inwards stocks, but small-scale caps proceed to notably underperform large caps.  As a result, nosotros run across continuing deterioration amid the breadth measures.  New monthly lows ticked upwards to 192, the highest degree since Feb 24th together with monthly highs dipped to 451.  Relatively weak sectors lately include unloose energy shares (XLE) together with healthcare (XLV).  Today's trading volition live dominated past times the afternoon's Fed announcement.  

*  We proceed quite stretched on my intermediate clit measure, which looks at the number of SPX shares making fresh 5, 20, together with 100-day highs versus lows.  (Data from Index Indicators).  If the Fed-related merchandise can't interruption us from the breadth deterioration, I await an intermediate-term correction.  That would non necessarily live an terminate to the bull displace from February's lows, but could advise a new, topping stage to the electrical current marketplace cycle.  During a topping stage nosotros tin run across higher overall prices for the index, but amongst deterioration inwards some sectors contributing to lagging breadth.  

   
*  Here is a unique intraday indicator that looks at buying clit per unit of measurement area amid all U.S. listed shares.  It tracks upticks amid all shares (data from e-Signal) together with expresses the final result inwards measure difference units.  This shows us when important buying is coming into the market.  It likewise shows us when at that topographic point is a meaningful absence of buying.  (A corresponding stair out tracks important selling together with absence of selling pressure).  It helps longer-term positions when those are going amongst the flows.  The nautical chart below shows yesterday's market.

Tuesday, March 15th

*  I'll live making an improver to these marketplace notes together with including each 24-hour interval links to readings that I discovery specially informative together with useful.  To boot this off, banking concern check out the Paststat blog for daily trading ideas based upon historical patterns, including this 1 based upon seasonality.  From my perspective, such patterns are the starting signal for analysis, non an terminate point.  Once nosotros run across a pattern, the difficult piece of occupation remains of deciding: 1) is the electrical current marketplace authorities typical of the menstruum covered past times the historical test; 2) is at that topographic point a audio argue for the beingness of the pattern, or mightiness the designing live a random occurrence; together with 3) what is the variability or together with thus the designing (could yous endure the exceptional instances)?  Factoring marketplace history into trading decisions is no guarantee of success--it's slow to aspect inwards together with thus many places that some "significant" designing appears--but ignorance of marketplace history is non just a promising alternative.

*  The relative absence of selling clit per unit of measurement area inwards Monday's session was noteworthy together with helped atomic number 82 to higher prices for much of the session earlier a belatedly selling burst.  Selling has continued overnight amongst no novel shot inwards the arm from the Bank of Japan.  Trading was unusually wearisome on Mon together with nosotros could larn to a greater extent than of the same ahead of tomorrow's Fed announcement.  Note how short-term breadth has been potent for a number of days; the stair out below tracks the percent of SPX stocks closing to a higher house their 3, 5, together with 10-day moving averages.  (Data from Index Indicators).

       
 *  The marketplace looks tired to me--for the origin fourth dimension since the liftoff from the Feb lows.  Specifically, we're getting fewer shares registering novel highs during marketplace rallies.  Much of that relative weakness is coming from small-scale cap shares.  Yesterday nosotros saw 921 stocks across all exchanges brand fresh monthly highs against over 2000 in conclusion week.  (Data from the Barchart site).  No private sector inside the SPX looks distinctively weak together with I'm non at all convinced that we're going into deport mode.  Rather, I await a normal correction inside a bull move.  With the absence of selling having problem bringing us higher, I'm leaning toward selling bounces that cannot maintain us to a higher house the overnight highs.  Of course, the upcoming Fed annunciation volition supply a major catalyst for stocks tomorrow.


Monday, March 14th

*  Those who know me good know that I create non subscribe to the thought that successful trading is by together with large a operate of psychology.  Without an objective trading edge, one's frame of bespeak heed volition but dictate the charge per unit of measurement at which nosotros portion amongst our capital.  Still, psychology is necessary, if non sufficient, for success together with yesterday's post service was mayhap my clearest explanation why.

*  We shut close the highs on Friday, continuing the upswing next the post-ECB selloff.  The ascent left us quite stretched short-term, amongst over 90% of SPX stocks trading to a higher house their 3, 5, 10, together with 20-day moving averages.  This inwards itself is non a mutual occurrence.  Going dorsum to 2006, I could exclusively discovery 12 instances of this happening when VIX has been below 20.  Interestingly, three were up, ix downward the side past times side 24-hour interval for a internet loss, but 10 were up, 2 downward after three days.  We're trading a fighting lower premarket equally I write; the depth of a side past times side pullback volition state us a lot nearly possible upside momentum over the side past times side few days.

*  One line of piece of occupation concern starting to travel inwards my caput is that Friday's highs were the origin inwards which nosotros saw sizable breadth divergences.  If nosotros aspect at all stocks across all exchanges, nosotros tin run across that 1087 made fresh monthly highs on Fri against 2082 the prior Friday.  Much of this is a operate of relative weakness amid small-scale caps.  We exclusively had 92 novel monthly lows on Friday, together with thus naught is standing out equally weak together with I'm non expecting whatsoever grand reversal.  I am concerned, however, that nosotros could run across a decent pullback from these levels equally portion of the start of a topping process.  Bottom line is that I was happy to receive got profits belatedly Fri together with I'm happy to remain on the sidelines together with run across what the bears tin bring.  Ideally, I'd similar to live a buyer of weakness early on inwards the calendar week for at to the lowest degree a retest of highs thereafter.  But I'm non seeing favorably skewed risk/reward right here, right now.

Info!! Coin Menstruation Into The Consumer Discretionary Sector

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

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

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

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

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

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

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

Info!! Indicator Update For March 10Th

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

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

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

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

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

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

Info!! Tracking The Footprints Of Provide In Addition To Bespeak Inwards The Stock Market

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

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

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

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

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

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

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

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

Further Reading:  Why to Keep a Journal
.

Info!! What The Cumulative Adjusted Nyse Tick Trouble Is Telling Us

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

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

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

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

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

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

Trading With the TICK

Trading Breakouts With TICK
.

Info!! Viewing Forcefulness Together With Weakness Every 2Nd Dissimilar Dimensions Of The Market

When assessing the market, I notice it helpful to process forcefulness in addition to weakness every bit independent variables.  In other words, nosotros tin get got markets inward which many stocks are rigid in addition to few weak; many weak in addition to few strong; few rigid in addition to few weak; in addition to many rigid in addition to many weak.  The latter is possible when correlations amid sectors in addition to stocks are relatively low.

Let's accept the Parabolic SAR indicator organization developed past times Wilder.  One way I rail marketplace position forcefulness in addition to weakness is to accept a cumulative running full of Parabolic SAR purchase signals minus sell signals for all NYSE issues (red line, above).  This has been helpful inward capturing cyclical guide inward SPY (blue line). (Raw information from StockCharts.com).  

But nosotros tin besides reckon the purchase signals from the organization separately from the sell signals every bit proxies for marketplace position forcefulness in addition to weakness.  For example, since mid-2014, when I origin began collecting these data, when nosotros carve upwards the sample into quartiles, nosotros notice that, afterward a unmarried 24-hour interval of many novel purchase signals (top quartile), the adjacent 10 days inward SPY get got averaged a loss of -.23%.  After a unmarried 24-hour interval of few purchase signals (bottom quartile), the adjacent 10 days inward SPY get got averaged a hit of +.80%.

When we've had really few sell signals (bottom quartile), the adjacent three days inward SPY get got averaged a hit of +.26%, compared alongside a -.01% loss for the residual of the sample.  Over a adjacent 10-day period, however, when we've had many sell signals (top quartile), the adjacent 10 days inward SPY get got averaged a hit of +.52%, compared alongside an average hit of +.09% for the residual of the sample.

Overall, the pct of variance inward daily sell signals accounted for past times purchase signals is entirely almost 10%.  They indeed are to a greater extent than independent than 1 powerfulness expect.  It is in the interplay of waxing/waning buying in addition to selling that nosotros tin sensitively rail bicycle dynamics.

Combined perspectives tin get got their use, every bit well.  Suppose we facial expression at the full number of purchase *and* sell signals each day.  Interestingly, when nosotros get got many buys in addition to sells (top quartile), the adjacent 10 days inward SPY get got averaged a hit of +.33%.  When we've had really few buys in addition to sells (bottom quartile), the adjacent 10 days inward SPY get got averaged a hit of +.59%.  All middle occasions get got averaged a loss of -.06%.

Think almost how momentum in addition to value operate, in addition to and thus recollect what it agency to get got many versus few trading signals.  Think almost bicycle construction in addition to when you'd facial expression to get got many in addition to few trading signals.  We tin larn a lot in 1 lawsuit nosotros tease apart forcefulness in addition to weakness in addition to sentiment markets multidimensionally.

Further Reading:  The Dynamics of Stock Market Cycles
.

Info!! Tracking Instantaneous Render Together With Remove Inward The Stock Market

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

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

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

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

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

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

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

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

Further Reading:  Using Upticks as well as Downticks to Identify Trend Days inward the Market
.

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.