Info!! Stock Marketplace Pose Volatility: A Historical Perspective

We are currently living through a catamenia of meaning stock marketplace volatility. Let's guide keep both a historical together with a psychological await at what that means.

The nautical chart higher upwards shows the S&P 500 cash index (blue line) versus its 20-day average daily truthful gain (ATR). The 20-day ATR is a mensurate of actual cost volatility inwards the index; non implied volatility equally calculated past times options together with non premium levels built into options pricing. The ATR is the larger of the following:

* The percent cost gain betwixt today's high together with depression prices;
* The percent cost gain betwixt today's high cost together with yesterday's closing price;
* The percent cost gain betwixt yesterday's closing cost together with today's depression price.

What this agency is that ATR captures, non alone the size of the gain during the trading day, only too the gaps that hand off betwixt yesterday's unopen together with today's trading. It is a mensurate of past times cost volatility both inside together with betwixt trading days.

The nautical chart is showing us that actual cost volatility has gone into a parabolic ascension together with that nosotros of late exceeded the volatility levels from the 2002 acquit marketplace period.

How meaning is this?

I went dorsum to 1962 together with looked at periods inwards marketplace history inwards which the 20-day ATR for the S&P 500 Index has exceeded 3%.

Here are the marketplace periods together with the highest levels of volatility for each:

* October/November 1987: 5.60%
* October/November 1974: 3.95%
* Oct 2008: 3.84%
* July/August 2002: 3.83%
* June 1970: 3.40%
* June 1962: 3.31%
* Oct 2002: 3.25%
* Dec 1973: 3.10%

As nosotros tin see, the electrical current grade of cost volatility is non without precedent, only is at real meaning levels: the 3rd highest catamenia since 1962. (By contrast, the median 20-day ATR since 1962 has been 1.40%; the criterion departure over that catamenia has been .57%).

From a psychological advantage point, volatility represents doubtfulness inwards the market's estimations of value. Imagine a marketplace inwards which at that spot was no volatility whatsoever: marketplace participants would endure inwards perfect understanding equally to the value of stocks together with so would guide keep no argue to merchandise amongst ane another. As at that spot is disagreement inwards estimations of value, nosotros guide keep incentives to trade, equally each player believes that the marketplace volition ultimately motion to his or her projected fair value.

When those estimations of fair value perish widely dispersed together with when participants brand corking shifts inwards these estimations, markets perish to a greater extent than volatile. During times of economical together with political crisis, such equally the 1962, 1987, together with 2002 periods, nosotros run into such volatility inwards the pricing of markets. Influenza A virus subtype H5N1 unopen await at the historical tape suggests 2 conclusions:

1) Periods of historically high volatility guide keep tended to hand off during acquit markets together with guide keep been associated amongst long-term opportunities for investment. If you lot await at the periods inwards which we've had real high volatility, these guide keep tended to fit amongst of import acquit marketplace lows since 1962. The notable exception was December, 1973, which was an intermediate depression inwards an ongoing acquit market;

2) Periods of historically high volatility tin persist together with produce non necessarily fit to precise acquit marketplace cost lows. Volatility was high through much of the latter business office of 2002, for instance, together with yet stocks did non bottom until March of 2003. We didn't larn a cost bottom until Dec of 1974, later volatility had peaked the calendar month before.

So where does that exit us? As long equally volatility is historically high *and* on the rise, equally is the instance inwards the electrical current market, it is treacherous to pick bottoms. Periods of elevated volatility tin perish super-elevated, equally inwards 1987; they tin too persist, equally inwards 2002. Panicking together with rushing to liquidate your investment portfolio is too treacherous, however, equally these elevated periods guide keep been associated amongst unopen to of the greatest investment opportunities inwards the past times few decades. By next the marketplace similar a trader--tracking dollar-volume inflows together with outflows on a daily basis, the willingness of large marketplace participants to hitting bids or elevator offers, the involvement inwards riskier yields vs. security Treasuries--I notice it easiest to perish along myself out of problem equally an investor. That saves considerable upper-case alphabetic quality during periods of tape volatility; nosotros don't larn a bottom until valuations perish together with then depression that they stand upwards for irresistible bargains for investors. Those trading indicators advise that we're non at that spot yet.
.

Info!! Lessons Inwards Trading Too Psychology - 4: Volatility

When nosotros sympathise what is going on inward the market, it gives us a psychological feel of clarity in addition to control.  Much of our worst, reactive trading occurs when nosotros experience out of control.  Looking closely at how the marketplace is moving tin render us amongst understanding--and that tin hold upwardly tremendously helpful non entirely to our trading, merely also to our trading psychology.

In hearing from many traders recently, I'm finding that they are having a hard fourth dimension adapting to the market's shifting volatility.  With volatility declining--and the volatility of volatility waning--we larn choppier marketplace conditions.  With volatility expanding--and greater vol of vol--we encounter momentum moves.  Many times, traders are zigging when they should hold upwardly zagging because they are misreading--or *not* reading--market volatility.

Above is a tool I created inward almost forty minutes from historical information via the e-Signal platform.  Here we're looking at the volatility (high/low range) inward each v infinitesimal bar inward SPY relative to the average attain for that same fourth dimension bar over the prior v trading sessions.  So, for example, we're seeing how today's 9:30 - 9:35 AM EST bar compares inward size to the average 9:30 - 9:35 AM EST bar for the prior v trading sessions.

Note how, from the really root of trading yesterday, nosotros were seeing relative ratios below 1.0.  That agency we're getting less motility inward each fourth dimension catamenia than we've seen over the by calendar week of trading.  Very speedily that tin alarm you lot to the fact that this is non probable to hold upwardly a high momentum market.  In the lower volatility environment, moves are less probable to extend in addition to nosotros desire to hold upwardly to a greater extent than selective almost taking trades in addition to opportunistic almost taking profits.

Note also how it would hold upwardly slowly to practise this relative volatility mensurate for whatever stock or index you're following.  We typically await closely at cost movements in addition to trends; we're less probable to test how volatility is trending.  Adapting our trading to the marketplace surroundings allows us to recognize when nosotros should hold upwardly trading moves in addition to when nosotros should hold upwardly fading them.  That tin eliminate a helluva lot of frustration!

Further Reading:

Trading With Relative Volume

Traderfeed Home Page in addition to Index

.

Info!! Is The Supplemental Liquidity Provider (Slp) Plan Affecting Merchandise Inwards The Stock Market?

the increased frequency of herding days inwards the stock market. Also for review is the postal service that highlights the NYSE TICK equally a mensurate of institutional sentiment. The Zero Hedge spider web log noted the shift inwards the NYSE TICK slow yesterday as well as attributed the before buying forcefulness to algorithmic trading, specifically the plan trading associated with the NYSE's Supplemental Liquidity Provider plan (SLP), much of which can live on attributed to Goldman Sachs. More on SLP tin give the sack live on constitute here.

I holler upwards Zero Hedge is on to something, only I suspect there's to a greater extent than to the storey than the directionality of TICK values. If the distribution of TICK values is elevated over time, it agency that programs are existence executed with an upward directional bias. SLP is supposedly a non-directional marketplace making program; if it were genuinely run inwards that manner, it should non persistently lift or depress TICK, since the marketplace making would live on a two-sided trade.

However, if marketplace making programs were unusually influential inwards the marketplace, nosotros should await to run into a higher measure divergence of TICK values. That is, to a greater extent than baskets executed should yield a wider variability inwards one-minute ranges of TICK readings. Those tracking TICK should run into a large release of elevated TICK readings amongst a large release of depressed readings, equally the liquidity provider(s) operate on both sides of the marketplace executing their handbasket trades.

Recently, this increased variability of TICK readings (along with elevated book inwards the ES contract) is exactly what we've been seeing during slow hateful solar daytime trade. The higher upwards nautical chart provides an example from yesterday's trade, with a moving 20-minute measure divergence of one-minute high-low-close NYSE TICK readings. Notice how nosotros larn to a greater extent than programs executed equally the session moves toward the New York close. Unlike the readings from before inwards the day, which were skewed positively, the slow hateful solar daytime readings featured many extreme one-minute readings on the purchase as well as sell side--precisely what you'd await if marketplace makers were active inwards plan trading.

A quick disclaimer: I am a psychologist who plant with hedge fund portfolio managers, banking concern traders on proprietary desks, as well as proprietary trading firms; I brand no claim to expertise when it comes to the microstructure of the market. Nor practise I receive the macro perspectives of my company fighting colleague from Zero Hedge. What I tin give the sack order you, equally ane who trades as well as plant with active intraday traders (including several that concern human relationship for a meaningful per centum of sum book inwards the CME S&P 500 (ES) e-mini contract), is that the slow hateful solar daytime merchandise has changed lately as well as those changes accept guide affected active marketplace participants. Those changes include increased herding demeanour (a historically odd release of days skewed toward buying or selling) as well as increased marketplace book as well as volatility during the concluding hr of trading.

My sense, from the information higher upwards as well as my observations of the market, is that plan trading has been affecting this market, only the impact appears to live on peculiarly concentrated slow inwards the trading day. If SLP were providing supplemental liquidity throughout the day, ane would await a full general tiptop of the TICK measure divergence compared with, say, a twelvemonth ago. My analysis of historical information suggests that that has non occurred. Rather, it appears that liquidity providers are exploiting anomalies that happen toward the cease of the day. I suspect these anomalies are related to 3 factors:

* Increased participation of proprietary (directional) traders who typically encompass their positions past times the marketplace close;

* Increased intraday administration of positions as well as portfolios past times portfolio managers hesitant to concord overnight risk, given the diminished gamble appetites of investors;

* Portfolio rebalancing amid increasingly pop leveraged index ETFs, which may amplify existing directional moves.

Given the concentration of this plan action inwards the concluding hour, a skeptic powerfulness live on led to conclude that this trading is to a greater extent than designed to assist the liquidity of participating trading firms than the liquidity of the marketplace. There is zip incorrect with this--unless the action is funded inwards business office or whole past times a stock central working inwards conjunction with fiscal institutions backstopped past times the government, creating a less than grade playing plain for independent traders as well as investors.
.

Info!! Trading Notes For The Calendar Week Of April 18, 2016

Friday, Apr 22nd

*  Excellent shipping service from Jesse Felder questioning the wealth lawsuit from recent key banking concern policy.

*  Stocks pulled dorsum inward Thursday's trade, amongst fewer than 50% of SPX shares closing inward a higher house their three in addition to 5-day moving averages.  Despite the pullback, fifty-fifty my shorter-term measures stay inward overbought territory, as seen below:

*  Note how the pullback inward bond prices (rise inward yield) was accompanied past times drops amidst consumer staples (XLP), utility (XLU), in addition to existent estate shares (IYR).  Because these sectors offering enhanced yield in addition to because authorities bonds offering in addition to thence piddling yield, charge per unit of measurement views are playing out inward these stock sectors.  This is a real relevant dynamic for traders/investors.

*  Retail (XRT) in addition to technology scientific discipline (XLK) shares receive got been underperformers lately; much of the recent strength has come upwards from commodity related sectors (XLB, XLE, XME).  Strong commodities (DBC) are unopen to other macro subject playing out inside stock sectors; the relative surgery of stock sectors has been of import lately...it's non precisely risk-on, risk-off across all sectors.

*  China underperforming recently amidst concerns almost credit defaults.  On the radar...


Thursday, Apr 21st

*  Rob Hanna shares historical marketplace patterns on the Quantifiable Edges blog.  Also cheque out Rob's operate amongst Scott Andrews on the InvestiQuant blog.  Lots of proficient ideas here.

*  Stocks continued their deed higher on continued positive breadth.  Across all exchanges, nosotros had 1205 stocks brand fresh monthly highs against 192 lows.  As noted earlier, it's the absence of distinctive weakness inward whatever of the sectors that is noteworthy inward the recent marketplace strength.

*  Here's a valuable perspective on furnish in addition to need inward the States of America stock market.  It's a 10-day moving average of upticks versus downticks amidst all NYSE shares.  Note that, since the Feb lows, that average has never dipped below zero.  Most late this strength has been due to the depression grade of downticks; quite simply, nosotros are non seeing sustained selling from institutions in addition to this has kept stocks aloft.

  *  Here's a await at what's been relatively rigid in addition to weak amidst stock sectors from the FinViz site.  Note the odd strength amidst commodity related shares--a consummate reversal of the weakness nosotros saw early on inward the twelvemonth in addition to through a proficient chunk of 2015.  Renewed strength amidst commodities has been the clearest indication that markets are no longer pricing inward deflationary forces in addition to that's been proficient for global stocks.

Wednesday, Apr 20th

*  Looking for a sketch pad for quantified patterns inward stocks in addition to ETFs?  Great screener on Kora Reddy's Paststat site.

*  Stocks moved to novel highs for this run, amongst significantly expanded breadth.  Across all exchanges, stocks making fresh three calendar month highs vaulted to a novel peak.  (See below).  The full general dominion is that peaks inward breadth/momentum tend to precede cost peaks for bull cycles.  While breadth is stretched here--and indeed we've pulled dorsum inward overnight trade--we proceed to consider dips at successively higher cost lows, which is what makes for bull moves.

*  Influenza A virus subtype H5N1 different agency of looking at breadth tracks the divulge of NYSE stocks giving purchase versus sell signals across a diversity of technical trading systems.  I hold those stats as a cumulative running total, which has also displayed odd strength inward recent sessions.  (See below).  What is as noteworthy is that few shares are giving sell signals, which is a reflection of the depression grade of selling pressure level evident inward the upticks/downticks data.  Bottom line, I'm non seeing signs of deterioration inward this marketplace at the introduce time.

*  Note also the breakout strength amidst international equity indexes (EFA).  We've seen broadening international strength inward stocks as the States of America dollar has weakened. 



Tuesday, Apr 19th 

*  Limited notes side past times side few days;  working amongst traders inward London. 

*  Breadth continues strong,  with over one k fresh monthly highs in addition to over 80% of SPX stocks closing inward a higher house their 3, 5, in addition to 10 twenty-four hours moving averages. 

*  The stair out of upticks in addition to downticks continues to present unusually depression selling pressure. Stocks are unlikely to sustain weakness if institutional participants are non selling. 


Monday, Apr 18th

*  One of the greatest life risks nosotros take is playing it safe.  Life is also of import to live on wasted on inconsequential goals.

*  Recently the striking charge per unit of measurement on my trades has gone up.  That's because I'm non *trading*.  I am entering positions similar an investor in addition to exiting similar a trader.  Waiting for things to work upwards across different fourth dimension frames provides the proficient entry.  Defining a pregnant deed for a given volatility regime in addition to exiting when that is achieved provides the proficient exit.  Slow to instruct into trades, quick to instruct out when the marketplace gives proficient prices.  Perhaps the border inward such a method lies inward making *not trading* the default.  All I tin laissez passer on the axe say is that my involvement inward markets has redoubled always since I got away from screens.  Frequent trading is similar frequent eating: naught could live on worse for the palate, stomach, in addition to appetite!

*  Stocks opened the weekend lower on the heels of the inability of the OPEC coming together to attain an understanding over production cuts.  Since the early on trade, stone oil in addition to stocks receive got rebounded a bit; I'll live on watching the correlation betwixt stone oil in addition to stocks to consider if nosotros re-enter the regime that was bearish for both, as good as for high yield bonds.  Influenza A virus subtype H5N1 resumption of a rigid dollar merchandise would fuel such a regime; inward the absence of the dollar trade, the correlation betwixt stone oil in addition to stocks may live on less certain.

*  Breadth dipped on Friday, amongst 795 stocks making fresh monthly highs in addition to 137 registering novel lows.  My volatility measures receive got striking depression levels that receive got been associated amongst marketplace tops, including the "pure volatility" stair out that tracks the average volatility per unit of measurement of trading volume.  So far, nosotros haven't seen a pregnant expansion of selling pressure level inward the uptick/downtick stair out or inward the novel lows data; I'm watching those closely.  My "pure correlation" measure, tracking the correlation amidst stocks specific to given volatility regimes, also is at (low) levels historically associated amongst subnormal forwards returns over a several calendar week period.

*  My stair out of intermediate term strength, assessing novel highs versus lows across all SPX shares, has fallen toward neutral levels fifty-fifty as cost has moved higher.  While a few measures await toppy, it would surprise me if this bull deed were to all of a precipitous morph into a bear.  

Info!! Cross-Talk: Volatility In Addition To Stock Marketplace Lay Returns

Here's a swell weblog post service from Market Sci that builds upon an persuasion I wrote almost a spell back. Michael Stokes researched what happens inward the marketplace position afterwards relatively narrow make days versus broad make days. What he industrial plant life was that markets historically convey yielded superior returns next those broad make days compared amongst the narrow days. Another fashion of looking at this is that expansion of volatility has by together with large led to bullish returns going forward.

Michael also notes, "This approach defended good against the deport marketplace position of the early on 2000’s together with our most recent starting fourth dimension inward belatedly 2007 (interestingly though, it crashed together with burned inward the most recent Oct top march)."

This gets dorsum to the notion that "this fourth dimension *has* been different". Many historical patterns--particularly ones inward which extreme weakness convey led to bullish prospective returns--have non panned out during this decline. Expanded volatility has led to fifty-fifty greater volatility together with and then tape volatility, every bit prices convey moved steadily lower.

Michael's inquiry industrial plant life that the high volatility/bullish returns human relationship was noteworthy from 1993 through 2008, simply less convincing when looking at history going dorsum to 1970. This, too, fits amongst my sense inward marketplace position research: rarely produce patterns agree intact over all markets, across all marketplace position history. Rather, nosotros run across regimes inward which patterns volition manifest themselves for months together with years, entirely to laissez passer on fashion to dissimilar patterns together with regimes--usually when marketplace position weather condition change. I suspect that the crashing together with burning noted yesteryear Market Sci amongst honor to the volatility designing is ane slice of bear witness that regimes convey shifted--and may remain dissimilar for a considerable period.

Thanks to Michael for an splendid site; banking concern check out his posts on market nuts together with bolts together with coping amongst abnormal markets.
.

Info!! Historical Patterns In Addition To Regimes: A Await At Bearish Momentum Days

One of the chapters of my novel book (due out inwards the showtime quarter of 2009) explains how I role Excel in addition to historical marketplace information to position possible short-term trading edges. Unlike about traders, I produce non role these historical patterns equally mechanical trading signals. Rather, I process them equally hypotheses based on recent marketplace action. If I run into markets setting upward during the electrical flow hateful solar daytime inwards a trend that corresponds alongside the hypotheses from the historical studies, that helps me frame trading ideas for the day.

The recent sudden turn down inwards the stock marketplace has made historical marketplace studies quite difficult, equally the electrical flow marketplace weather condition are quite unlike from the ones that existed inwards recent years.

Let's accept a elementary example. Mon was a rattling weak hateful solar daytime inwards the market. As those who follow my morn Twitter posts know, I rails an indicator called Demand in addition to Supply. Demand is an index of the number of NYSE, NASDAQ, in addition to ASE closing inwards a higher house the upper volatility envelope surrounding a short-term moving average. Supply is an index of the number of stocks closing below the lower volatility envelope. On Monday, Supply exceeded Demand past times to a greater extent than than a element of 10; nosotros had to a greater extent than than 10 times equally many issues closing below their envelopes equally above.

Such rigid bearish momentum has exclusively occurred sixteen times since I began collecting these information inwards Oct of 2002. To broaden the number of observations for my historical study, I included all occasions since October, 2002 inwards which Supply exceeded Demand past times v times or to a greater extent than (N = 108). What nosotros abide by is that, after these rattling bearish momentum days, the S&P 500 Index (SPY) has been upward past times an average of .31% v days afterwards (64 occasions up, 44 down). The average five-day alter for the residual of the sample was apartment (789 up, 763 down).

But non in addition to thence fast. If nosotros interruption downward those bearish momentum days past times when they occurred, unlike patterns emerge. Since mid-year 2007, we've had xl days inwards which Supply has exceeded Demand past times v times or more. Five days later, the S&P 500 Index has averaged a loss of -.18% (19 up, 21 down). Interestingly, that five-day average loss followed an average side past times side hateful solar daytime attain of .46% (25 up, fifteen down).

Prior to mid-year 2007, nosotros had 68 instances of bearish momentum days. The S&P 500 Index averaged a attain of .60% (45 up, 23 down) v days later, alongside a side past times side hateful solar daytime average attain of exclusively .09% (38 up, thirty down).

In short, what nosotros run into is show of regimes, non universal marketplace patterns. Strong bearish momentum days led to favorable five-day returns from 2002-mid 2007. Since that time, however, rigid bearish momentum days stimulate got led to one-day snapback rallies, followed past times resumed weakness.

When trading historical patterns, it's non exclusively necessary to thought marketplace history, simply too to hold off for shifts inside that history. Those changing regimes offering fertile hypotheses to traders who tin flexibly accommodate their thinking.
.

Info!! Crude Volatility As Well As Marketplace Lay Psychology Perspectives For A Weekend

Great historical study of how cost patterns evolve over fourth dimension inward the stock market.

* Extreme Negative Sentiment This Past Week - Interesting observations from Richard Peterson's blog, which covers both trader as well as marketplace position psychology.

* Hope Comes at a Cost - Great historical study of how cost patterns evolve over fourth dimension inward the stock market.

* Extreme Negative Sentiment This Past Week - finds a worthwhile edge.

* Thanks - For the continued positive comments on the Twitter posts, which accept expanded to include links to fundamental marketplace position themes, summary of marketplace position indicators, upcoming economical reports, as well as occasional marketplace position observations.
.

Info!! The Importance Of Becoming An Adaptive Trader

Above nosotros tin run across the functioning of the S&P GSCI commodity index over the past times several years.  It's an interesting nautical chart together with helps explicate why commodities traders convey non had an slow fourth dimension of it recently.  You tin run across that the volatility of prices--as good equally the trend--have been crushed inward a steady grind.  Momentum together with tendency traders are probable to perform poorly inward such an environment.  From 2009 to early on 2011, however, those traders in all probability did well, equally volatility together with tendency had ramped higher.

It's a swell example of how markets--and fifty-fifty property classes--can shift "regimes".  They play past times i gear upward of direction together with volatility rules inward i environs together with hence follow a completely unlike gear upward of rules inward another.  Any trader who conducted historical studies inward the GSCI to anticipate time to come toll patterns was at run a hazard of extrapolating from a past times to a greatly changed introduce together with future.  You could imagine that a trading organisation based on yesterday's authorities could backtest wonderfully together with hence neglect miserably i time the marketplace position trades past times a unlike gear upward of rules.

If skillful trading just were a thing of planning together with exercising dependent champaign inward next plans, many to a greater extent than people would succeed at it.  Disciplined plan-following plant good when regimes are relatively constant.  Once markets initiative of all playing past times a unlike gear upward of rules, however, the challenge is to adapt--not just double downward on rigidly next one-time strategies.

Realized volatility inward the stock marketplace position has percolated higher of late.  Is this role of a authorities shift or create the one-time marketplace position rules apply?  Can nosotros extrapolate from the past--say 2013--to anticipate marketplace position movement inward the virtually future, or create nosotros ask to figure out the novel marketplace position rules earlier making inferences?  I spent a skillful chunk of my weekend reworking my regression models for stocks exactly because I detected the underlying rules were shifting.

What builds a career of trading success is the mightiness to recognize modify together with accommodate to it.  At to a greater extent than or less betoken at that topographic point volition hold upward a volatility breakout inward GSCI together with commodities volition travel a real unlike functioning game.  It's the adaptive trader that volition recognize the game shift early, avoid getting run over, together with profits from emerging trends.  It helps to convey conviction inward your trading, but longevity requires flexibility inward conviction.

Further Reading:  Adapting to Shifts inward Market Regimes

Info!! Growing Your Trading Yesteryear Integrating Quantitative As Well As Discretionary Processes

A developing trader makes progress yesteryear mimicking a mentor, an experienced together with successful trader.  That developing trader becomes an experienced together with successful trader yesteryear finding multiple mentors together with integrating the wisdom together with best practices of each.  If you lot await at grooming programs from medicine to the military, you'll notice rigid mentors together with multiple mentors.  We acquire skills together with nosotros integrate them: that generates expertise. 

A distinct tendency inwards recent years is using multiple mentors to integrate quantitative approaches to trading amongst discretionary ones.  Influenza A virus subtype H5N1 elementary event occurred at a draw solid where I worked, where several of us developed a predictive model for tendency days inwards the stock market.  We examined days that qualified every bit tendency days together with days that did non together with built a elementary model based upon such variables every bit book together with breadth.  The output from that model was hence shared amongst traders, who integrated the results into their ain trading.  So, for example, a trader mightiness focus on stocks virtually probable to do goodness from the tendency yesteryear looking at volatility, relative strength, etc.  Influenza A virus subtype H5N1 unlike trader mightiness operate the model output to extend the belongings fourth dimension on a merchandise that had already hitting its commencement target.

Yet around other event of integration would move using historical studies of marketplace tendencies to frame merchandise ideas.  Some of those studies tin strength out move constitute via Quantifiable Edges together with from Paststat together with from InvesiQuant.  Still to a greater extent than quant resources tin strength out move constitute via the first-class Quantocracy resource.  Market regimes tin strength out alter together with what happened inwards history may non move mirrored inwards the close future, only knowing tendencies from well-constructed studies tin strength out say you lot what markets *usually* do inwards a given laid of circumstances.  Some of the best discretionary trading comes from occasions when markets neglect to do what they "should" move doing, every bit that tells us that idiosyncratic factors together with flows are dominating trade.  

The powerfulness to integrate novel data together with styles into our trading is what keeps us learning, developing, together with adapting to changing markets.  It's when nosotros don't integrate that nosotros stagnate.  The virtually consistent finding I've made every bit a trading omnibus is that the best traders notice multiple ways to win.  Those traders tin strength out move successful inwards multiple marketplace regimes.

Further Reading:  Identifying Trend Days inwards the Market
.

Info!! Trading Psychology Diagnosis: Identifying The Beginning Of Trading Problems

Every trained medico knows that diagnosis precedes treatment.  We receive got to sympathise what is going incorrect earlier nosotros attempt whatsoever sort of solution.  Auto mechanics engage inwards the same process: they remove heed to the engine, human face nether the hood, as well as run tests earlier they seat problems as well as laid out to create them.  

Too often, traders attempt solutions for their trading problems earlier they've really understood the sources of those problems.  Equally often, mentors as well as coaches of traders offering their solutions without really going through a thorough diagnostic process.  In this post, I volition model for yous a way of thinking that tin give the axe attention yous seat what mightiness survive going incorrect with your trading.  This way of thinking is anchored yesteryear several of import questions.

Question #1:  Is in that location really a work here?

This may appear similar a foreign question.  You've exactly drawn down; you've been frustrated inwards your trading.  Of course of report there's a problem!  The issue, however, is a flake to a greater extent than subtle.  Any successful trading is soundless a probabilistic enterprise.  Hit rates as well as Sharpe Ratios don't grow to the sky; people are fallible as well as markets embed a fair amount of uncertainty.  As a result, losing periods are inevitable as well as frustrations volition survive encountered.  Just equally nosotros human face baseball game hitters to strike out every thence frequently as well as football game quarterbacks to throw incomplete passes on occasion, nosotros tin give the axe human face losing trades.  H5N1 trading approach with a 60% hitting charge per unit of measurement could survive phenomenally profitable, but it volition soundless run across strings of losing trades with regularity.

What this agency is that nosotros laid out the diagnosis yesteryear examining a meaningful sample of yesteryear trading, non exactly the final few days or trades.  H5N1 frequent solar daytime trader making many trades a solar daytime mightiness human face at the month's results as well as compare with results from the yesteryear year.  H5N1 longer term trader mightiness demand to get together information over a twelvemonth or to a greater extent than earlier confidently identifying a problem.  In other words, to seat a problem, it's necessary to regard that recent results autumn curt of yesteryear ones as well as that recent drawdowns are non similar to yesteryear ones.  That requires a proper historical view.

When traders assume that a work exists without a sufficient historical analysis, they run the adventure of tinkering with methods that operate as well as making those methods worse.  This is really truthful when traders laid out to merchandise systems.  They acquire discouraged when the arrangement has a (normal as well as expectable) drawdown, thence they laid out to alter the system, front end run the system, etc.--only to plow the setbacks into protracted slumps.

Sometimes traders are taking likewise much risk--trading seat sizes likewise large for their actual loss tolerance--and those strings of expectable losing trades create a "risk of ruin" situation.  In such a case, the trader tin give the axe human face at hitting rates as well as average win/loss statistics as well as create upward one's heed whether the work is inwards adventure taking or if the actual surgery of the trading methods has changed.

All of this is a rigid declaration for keeping detailed surgery metrics on your trading.  Only yesteryear comparison recent surgery to yesteryear surgery tin give the axe yous sympathise if yous really are improving inwards your trading or having an actual problem.  If you're a commencement trader, as well as then yous would compare your recent returns to the returns yous achieved inwards simulation mode.  (For to a greater extent than on trading metrics, regard this post; also this post.  H5N1 detailed handling of trading metrics tin give the axe survive flora inwards Chapter 8 of The Daily Trading Coach). 

Question #2:  If in that location is a work present, is it associated with a alter inwards the market(s) you're trading?

My firstly hypothesis when I run across a trading work (my ain or that of an experienced trader) is that the work has occurred for a reason, as well as that argue is related to a alter inwards how markets receive got been trading.  Because of those changes, the methods that had been working no longer ascendance the same edge.  

A swell instance of this has been the recent turn down of volatility inwards the stock market.  Many, many traders who made coin from momentum as well as tendency trading receive got suffered during this depression volatility menstruum because moves no longer extend and, indeed, tend to reverse.  That, inwards turn, leads to frustration as well as discouragement.

The key tell for when trading problems are related to changes inwards markets is that people trading similar strategies are also experiencing surgery difficulties.  This is ane argue it's of import to receive got a broad network of trading colleagues, fifty-fifty if yous merchandise independently.  If the swell bulk of traders trading similar styles are also experiencing drawdowns, yous tin give the axe safely assume that non everyone has turned into an emotional handbasket instance at the same time.  

Performance indexes for diverse hedge fund as well as CTA strategies are available from manufacture sources as well as tin give the axe attention seat when certainly approaches are winning as well as losing.  For example, the Barclay's curt term trading index (STTI on Bloomberg) tracks the returns of professional person coin managers trading curt term momentum as well as trends.  The surgery of those managers over the yesteryear twelvemonth or 2 has been dismal, ane time again related to the collapsed volatility of markets inwards the wake of depression involvement rates approximately the globe.  

If your trading problems are widely shared as well as tin give the axe survive linked to shifts inwards how your markets receive got been trading, no psychological exercises inwards as well as of themselves volition solve the problem.  Nor is it a solution to seat one's caput inwards the sand as well as promise that markets volition "turn around".  Rather, the respond to the trading problems is to adapt to the novel surround as well as search for fresh sources of border that tin give the axe complement one's traditional trading.  For example, ane mightiness detect hateful reversion or relative value strategies that nicely complement one's directional/trend/momentum trading.  The combination of trading approaches really diversifies returns as well as produces a smoother P/L curve.  (See Trading Psychology 2.0 for a detailed presentation of adapting to changing markets).

Question #3:  If in that location is a personal work present, is it--or has it been--present inwards non-trading parts of your life?

Here is a very, really of import issue.  Many personal issues, such equally anxiety, anger, depression, attending deficits, as well as impulsivity, exhibit upward inwards trading, but non solely inside trading.  For example, a mortal mightiness receive got problem with patience as well as frustration inwards personal relationships, as well as those same problems crop upward inwards his human relationship with markets.  Similarly, a mortal mightiness receive got self-esteem problems inwards life that as well as then exhibit upward equally negative thinking patterns during periods of marketplace losses.  When the emotional patterns, thought patterns, as well as behaviour patterns that interfere with trading are also occurring as well as interfering with other aspects of life, that is a rigid indication that exactly working on trading volition non survive sufficient.  It makes feel to seek professional person help.

The swell bulk of psychological challenges tin give the axe survive dealt with via short-term approaches to counseling as well as therapy.  Research suggests that problems such equally human relationship difficulties, depression, anxiety, as well as anger tin give the axe do goodness significantly from cognitive, behavioral, psychodynamic, interpersonal, as well as solution-focused approaches. (A thorough review of enquiry as well as do inwards this expanse tin give the axe survive flora in the textbook that I receive got co-edited.  H5N1 novel edition volition survive coming out belatedly this year).  The key to brief approaches to therapy is that they are highly targeted as well as brand active usage of exercises as well as experiences during as well as betwixt sessions.  

In situations inwards which the psychological problems receive got been longstanding, when in that location has been a seat unit of measurement history of similar problems, when those problems receive got been severe (significantly impairing of import areas of life), as well as when those problems receive got been complex (impacting many areas of life, equally inwards drug or alcohol abuse), longer-term approaches to helping are mostly indicated.  Attempting short-term approaches to attention for to a greater extent than important problems runs the adventure of relapse.  When problems receive got been longer standing, severe, as well as complex, it frequently is the instance that to a greater extent than than ane shape of attention is required, such equally medication attention inwards improver to therapy or grouping sessions (as inwards A.A.) inwards improver to counseling.  In such instances, it is really helpful to receive got a thorough assessment from a qualified mental wellness professional.  If in that location is meaningful depression and/or anxiety, a workup from an experienced psychiatrist is helpful, equally rubber as well as non-habit forming medications frequently tin give the axe play an of import usage inwards addressing the problems.

Depression, anxiety, attending deficits, addictions, bipolar disorder, human relationship problems--these impact a high percent of people inwards the full general population.  Traders are non exempt from these full general problems.  Assuming that an emotional number impacting trading is necessarily a trading number may forbid yous from getting the right sort of help.  No amount of writing inwards a trading periodical volition rebalance neurotransmitters inwards your encephalon or solve the conflicts yous pick out to your marriage.  When yous regard the problems affecting your trading also affecting other areas of your life, it's a rigid indication that a to a greater extent than full general approach to alter volition survive needed.

Question #4:  If the work you're facing occurs uniquely inwards trading settings, do yous demand psychological coaching or do yous demand farther mentoring of your trading?

Here ane time again is an of import distinction.  Especially for newer traders, frustrations as well as other emotional problems arise inwards trading exactly because they are soundless immature on their learning curves.  What they demand is non exactly emotional coaching, but guidance from experienced mentors who tin give the axe attention them right trading errors as well as to a greater extent than consistently apply trading skills.  Even experienced traders tin give the axe run across drawdowns as well as frustrations because they are making trading mistakes that a mentor tin give the axe choice up.  I late worked with a trader who was really discouraged because of a drawdown that occurred exactly because he was non closely monitoring correlations with his positions.  What he thought were several independent trades turned out to survive versions of the same merchandise ane time the primal banking concern indicated a possible policy shift.  He lost coin because he was likewise concentrated inwards that one, converged trade.

This is yet some other argue why it's really helpful to survive connected to networks of peer traders.  Many times such relationships offering usual mentoring that tin give the axe address situational problems as well as mistakes inwards trading. 

When drawdowns as well as disruptions of trading are to a greater extent than psychological as well as situational, several psychological approaches tin give the axe survive helpful, including behavioral methods (exposure therapy) for anxiety as well as surgery pressure; cognitive restructuring techniques for perfectionism, overconfidence, as well as negative thought patterns; as well as solution-focused approaches to seat as well as expand one's ain best practices.  (Specific applications of these methods tin give the axe survive flora inwards The Daily Trading Coach; the creation of best practices is a major theme inside Trading Psychology 2.0; an overview of cognitive as well as behavioral techniques for improving trading surgery tin give the axe survive flora inwards Enhancing Trader Performance).

Behavioral techniques are skills-building methods that yous do inwards existent time, during work situations.  You literally are didactics yourself novel skills as well as novel habit patterns.  For example, a really unproblematic behavioral technique would survive to accept a interruption during trading whenever yous experience anxious, frustrated, bored, or discouraged.  You rapidly recognize that you're non inwards the right mindset for trading as well as yous accept a interruption from the screens.  During that break, yous mightiness engage inwards other skills-building activities, such equally relaxation preparation to irksome oneself downwards as well as cut tension.  Behavioral methods are typically skillful exterior of trading hours thence that the skills acquire automatic inwards existent time, when problems crop up.  

Cognitive restructuring methods are techniques that yous usage to seat as well as challenge patterns of negative thinking that tin give the axe distort your emotions as well as interfere with audio conclusion making.  Many traders, for example, acquire highly self-critical when they lady friend a merchandise or when they accept a loss.  This tin give the axe interfere with their focus on the adjacent opportunities.  In cognitive restructuring, keeping a periodical helps the trader acquire to a greater extent than aware of his or her thinking as well as challenge that thinking when it's harsh as well as negative--or when it's overconfident!  

Solution focused techniques are ones that examine what yous are doing during your best trading, both inwards price of trading practices/processes as well as psychological self-management.  The finish of solution focused operate is to "do to a greater extent than of what works" as well as acquire to a greater extent than consistent thence that best practices tin give the axe plow into repeatable best processes.  Trading Psychology 2.0 contains 57 best practices contributed yesteryear myself as well as other traders; the chapter on Building Strengths also embraces a solution-focused approach to identifying what yous do best as well as edifice your trading approximately it.

The bottom work is that how yous operate on your trading should reverberate the diagnosis yous brand of your trading challenges.  Sometimes nosotros run across challenges because of tricky markets; sometimes because of our psychology; as well as sometimes those challenges are exactly a normal business office of adventure as well as dubiety inwards markets.  In this post, in that location are quite a few ideas tossed out.  For to a greater extent than information on those, yous tin give the axe exactly Google the relevant theme yesteryear entering "Traderfeed" as well as the theme of interest.  Thus, locomote inwards into the search engine "Traderfeed solution focused" as well as you'll regard quite a few posts relevant to that topic.  If yous desire fifty-fifty to a greater extent than depth as well as detail, the to a higher seat bulk references volition survive useful.

In an upcoming serial of posts, I volition seat xx top challenges that traders confront as well as highlight specific approaches to operate on each of those.  Yet some other serial volition human face to a greater extent than into exceptional into evidence-based techniques that attention traders as well as when to usage those.  All of this is business office of a grander conception to eventually link all the posts into a free, user-friendly, comprehensive online encyclopedia of trading psychology.  

Thanks, equally always, for your involvement as well as support--

Brett

Info!! Pin Cost Target Based Historical Investigations

As weblog readers know, I postal service each morn earlier the marketplace pose opened upwards a series of proprietary cost targets for the S&P 500 Index (SPY). These Twitter posts summarize the prior day's Pivot grade (an approximation of the day's average trading price), also equally iii upside targets (R1, R2, R3) in addition to iii downside targets (S1, S2, S3). The targets convey been empirically derived to accommodate for recent marketplace pose volatility so that, dorsum to 2000, to a greater extent than or less 75% of all trading days volition hitting either R1 or S1; 50% volition hitting either R2 or S2; 33% volition hitting either R3 or S3.

Days--and periods of days--where nosotros don't hitting whatever of these targets are attain outflow days. These tend to cluster, given series correlations of volatility. Thus we'll convey periods of fourth dimension inwards which nosotros hitting 1 or to a greater extent than targets in addition to periods of fourth dimension inwards which we'll remain closer to daily pin levels. Much of the science of trading, across whatever fourth dimension frame, is identifying when we're inwards a directional marketplace pose environs (and so probable to hitting the cost targets) or a attain environs (and so probable to oscillate about pin levels and/or volume-weighted moving averages).

Once nosotros define the pin in addition to cost target levels for a item day, nosotros tin inquire some rather sophisticated questions. For instance, if nosotros hitting R3 or S3 inwards yesterday's trade, what are the odds of hitting the R1 or S1 grade today? If nosotros produce non hitting either R1 or S1 inwards today's trade, what are the odds that we'll convey a directional motion (i.e., 1 that hits 1 or to a greater extent than cost targets) tomorrow?

Notice that, the sectionalisation of marketplace pose moves into R1/R2/R3 in addition to S1/S2/S3, each adjusted for that market's grade of volatility, provides us alongside an objective mensurate of a day's directionality. We tin in addition to so inquire whether stronger upwards or downwards days (those that hitting R2/S2 or beyond) are to a greater extent than probable to Pb to reversal than days that alone hitting R1/S1.

Such investigations are probable to uncover trading patterns that furnish a possible border to traders. For example, did y'all know that the marketplace pose ii days from at in 1 trial (e.g., Monday's market) has a 43% adventure of touching today's (Thursday's) pin level? If nosotros part relative book into the mix, those odds ascension substantially. Knowing that nosotros convey high odds of a attain marketplace pose over a swing trading menstruum could live quite valuable to both twenty-four hr menstruum traders in addition to those belongings overnight.

To overstep away fifty-fifty to a greater extent than ambitious, imagine that nosotros calculate similar pin in addition to cost targets for diverse sector ETFs in addition to stock indexes. We tin in addition to so inquire such questions as, "What happens when the S&P 500 Index touches R1/S1 today, but fiscal stocks (XLF) produce non hitting their R1/S1?" If a sector hits its R1 early on inwards the trading day, what are the odds that the S&P 500 Index volition follow in addition to hitting its R1 target? Do for certain sectors tend to Pb the S&P 500 inwards hitting their targets?

All of these investigations offering potential conclusion back upwards for traders, in addition to Twitter is an ideal machinery for blasting the results of these investigations to traders inwards existent time. More to come--
.

Info!! What Happens Afterward Potent Upside Momentum Days Inwards The Stock Market

Monday, nosotros saw Demand--an index of the let out of stocks closing higher upward the volatility envelopes surrounding their short-term moving averages--exceed 190, piece Supply (an index of those closing below their envelopes) was exclusively 19.

Going dorsum to belatedly 2002, when I get-go began collecting these data, we've exclusively had 31 days inward which Demand has exceeded 180. That typically occurs afterward breakout moves, when many stocks display favorable upside momentum.

Interestingly, returns over the subsequent 5 days inward the S&P 500 Index (SPY) accept non been favorable. The average five-day alter next a large upside momentum solar daytime has been -.82% (14 up, 17 down). Nor accept returns been favorable 1-4 days out.

It appears that at that spot has been no short-term bullish border next large upside momentum days, alongside profits taking non uncommon.

Additional Comment vii AM CT - I notice that the fantabulous Market Tells as well as Quantifiable Edges newsletters--both of which characteristic historical trading patterns--arrive at somewhat like conclusions to the above, exactly each of them goes into to a greater extent than depth, alongside additional findings. Hats off to these worthwhile resources.

Note: Demand as well as Supply are proprietary measures; they're updated each morning time prior to the opened upward via Twitter (follow here).

.

Info!! Trading Notes For The Calendar Week Of April 4, 2016

Friday, Apr 8th

*  Insightful postal service on the misery of bull markets from The Reformed Broker.  Many traders are temperamentally long vol; the 1 prediction you lot most rarely request heed is 1 for piffling get as well as piffling toll change.

*  Going dorsum to 2010, if you lot accept the number of 5-day novel highs minus lows amidst SPX stocks as well as compare those to 20-day novel highs minus lows, you lot teach an interesting view.  When that fourth dimension serial is divided into quartiles, nosotros notice that when 5-day novel highs/lows greatly overstep 20-day highs/lows, the side past times side v days inwards SPY average a gain of exactly +.04%.  When 20-day novel highs/lows greatly overstep 5-day highs/lows, the side past times side v days receive got averaged a gain of +.39%.  (Raw information from Index Indicators).  Think of the implications for FOMO trading...

*  We reversed Wednesday's strength yesterday, closing amongst 5-day novel highs/lows good below the 20-day level.  Less than 20% of  SPX shares closed inwards a higher house their 5-day moving averages and, for the origin fourth dimension since this rally began, fewer than 50% of stocks closed inwards a higher house their 20-day averages.  My wheel mensurate is at 1 time neutral, every bit nosotros run off the recent potent readings (see below).

*  VIX has jumped to inwards a higher house sixteen amongst yesterday's drop.  I receive got built a model that predicts a normal VIX grade from 2 variables:  recent toll modify as well as recent realized volatility.  When VIX is to a greater extent than expensive than the model predicts it should move based on historical precedent, returns receive got been positive; when VIX is to a greater extent than inexpensive than the model predicts, nosotros receive got seen subnormal returns.  Th of concluding calendar week through Mon of this week, nosotros hitting inexpensive levels inwards VIX valuation.  With yesterday's drop, nosotros are dorsum to beingness expensive inwards VIX pricing.  To give an idea, going dorsum to 2012, when VIX has been inwards its most richly priced quartile, the side past times side v days inwards SPY receive got averaged a gain of +.76%.  When VIX has been most cheap, the side past times side v days receive got averaged a gain of exactly +.03%.  In short, when options participants toll inwards also much vol, nosotros tend to teach higher prices--which implies a hateful reversion inwards vol!


Thursday, Apr 7th

*  What would a startup community of traders expression like?  Love this postal service from Howard Lindzon, mainly for the entrepreneurial zest I run across missing amidst then many traders as well as trading firms.  Amazing what a difference it makes to move surrounded past times innovators who convey vision as well as optimism to the future.  I run across precious piffling of that inwards the trading community.

*  Stocks flora solid buying yesterday inwards the wake of oversold readings, but receive got pulled dorsum inwards overnight trade.  My intermediate-term strength measure, which looks at novel highs versus lows for SPX shares on iii dissimilar fourth dimension frames, continues to run off its extended readings.  Many of my cycle-based measures expression similar.  We're getting fewer novel highs amidst stocks as well as novel lows receive got ticked higher the concluding 2 sessions.  Yesterday, across all listed stocks, at that spot were 467 novel monthly highs as well as 417 novel lows.

*  Using information from the Stock Charts site, I rail the number of NYSE stocks giving purchase versus sell signals across multiple technical indicators, such every bit Bollinger Bands, CCI, Parabolic, etc.  Here also nosotros run across the waning strength recently.  My mensurate of breadth volatility (the volatility of breadth readings) has picked upward lately from depression levels as well as that by as well as large has been associated amongst weak returns.

*  Housing (XHB) has been relatively strong.  Not then much commodities (DBC).  Notice the strength of euro as well as yen versus the U.S.A. dollar (FXE as well as FXY).  Hard to believe that is what ECB as well as BOJ desire to move seeing; Federal Reserve annotation the relative weakness of European (VGK) as well as Japanese stocks (EWJ).

Wednesday, Apr 6th

*  We can't modify our behaviour unless we're aware of our behaviour patterns.  Here's a neat postal service on self-awareness as well as trading from Tradeciety.

*  The pullback inwards stocks continued on Tuesday, giving us the origin existent negative breadth reading we've had since the rally launched inwards February.  (See nautical chart below).  Across all exchanges, 270 stocks made fresh monthly highs as well as 492 registered novel monthly lows.  (Data from Barchart).  Only close 10% of SPX shares closed inwards a higher house their 3-day moving averages as well as close 15% inwards a higher house their 5-day averages (data from Index Indicators), telling us that the pullback has been broad.  VIX has climbed inwards a higher house xv as well as nosotros saw greater seat buying across private shares.

*  Yesterday I noted the expansion of purchase signals for stocks on the Stock Spotter site; those signals expanded fifty-fifty farther afterwards yesterday's weakness.  This has by as well as large been positive for SPX.  Their cyclical model for SPY is also quite bullish, which has backtested well.  While I'm viewing this every bit a pullback inwards a bull stage of a wheel as well as await a retest of recent highs, I volition move watching the vigor of whatsoever bounce carefully.  Given the breadth of the recent weakness, it would non surprise me if nosotros were to come inwards a to a greater extent than prolonged topping/range period.  We should run across pronounced breadth divergences on forwards strength if that scenario were playing out.

*   Note the considerable strength inwards high character corporate bonds (LQD).  As noted a piffling land back, these are natural candidates for those seeking yield.  On the other hand, high yield bonds (JNK) receive got been relative underperformers.  This is a defensively minded market, which could also move why U.S.A. shares receive got been outperforming overseas ones (EFA). 



Tuesday, Apr 5th

*  Excellent postal service on trading strategy as well as tactics from The Crosshairs Trader.  Very helpful inwards developing trading plans.

*  We've seen a pullback inwards stocks and, amongst Monday's close, at 1 time receive got fewer than 50% of SPX shares closing inwards a higher house their 3- as well as 5-day moving averages.  With 831 monthly novel highs as well as 288 novel lows, we're yet non seeing pregnant deterioration inwards the breadth data.  Energy stocks receive got been the weakest grouping given the recent crude weakness, but I'm non seeing pregnant weakness amidst whatsoever of the sectors.  Financials receive got been relatively apartment of late, then I receive got a unopen oculus on those.

*  The realized volatility of VIX has hitting levels that receive got been consistent amongst past times marketplace peaks.

*  I noticed that, every bit of yesterday's close, nosotros had an elevated number of purchase signals on the StockSpotter site.  I proceed to move impressed amongst their work.  Their forecast model for SPY also is bullish.  When those 2 factors receive got been introduce since belatedly 2013, when I origin began tracking their numbers, returns v to 10 days out receive got been bullish.  Specifically, we've been upward xix times, downward 8 over the side past times side 10 trading sessions for an average gain of +1.17%.  


Monday, Apr 4th

*  Long-term success, inwards trading as well as inwards life, way sustaining our passions.  Here's how nosotros utilisation that.

*  We're seeing fresh highs this morn as well as receive got almost exclusively erased the drib from belatedly December.  Fri closed amongst 767 novel monthly highs across all exchanges versus 217 lows.  Still no pregnant expansion of weakness inwards the upticks/downticks data, every bit nosotros closed Fri at fresh highs.  Note that the cumulative upticks/downticks mensurate has vaulted inwards a higher house 2015 levels.

*  Among SPX shares, novel 100-day highs outnumbered novel lows past times 127 issues (data from Index Indicators).  That is the strongest breadth reading on that mensurate since the rally began inwards February.  The concluding fourth dimension nosotros had a reading that potent was belatedly inwards 2014.  Note how nosotros receive got stayed overbought inwards the novel high/low mensurate for a considerable period, attesting to the momentum of this rise.

*  Note how crude has been moving lower solar daytime afterwards day, fifty-fifty every bit stocks receive got rallied to novel highs.  The crude drib is noteworthy, coming on the backdrop of a weaker dollar.  High yield corporate debt (JNK) has also failed to brand novel highs inwards the concluding duo of weeks as well as global stocks receive got lagged (EFA).  Could it move that weaker makes for stronger?  As long every bit we're seeing deflationary forces at work, the Fed is probable to hold a dovish stance.

Info!! Trading Notes: Calendar Week Of November 23Rd

Friday, Nov 27th

*  Not much changed from yesterday alongside honour to U.S. stocks, equally nosotros boot the bucket on to concord of import back upwards inwards the lower 2080s inwards the front end calendar month ES contract.  I boot the bucket on to move inwards the style of buying weakness that holds higher upwards overnight lows, but await merchandise to move deadening today given the long vacation weekend that many U.S. traders volition move taking.

*  So far, the number of stocks displaying odd forcefulness inwards the recent motion higher has been modest.  Below is a nautical chart of the number of NYSE issues closing higher upwards their upper Bollinger Bands minus the number closing below their lower bands.  (Data from the splendid stockcharts.com site).  To this point, that stair out of forcefulness has been waning.

*  Another resources that I stimulate got constitute quite useful is the Stock Spotter site.  They furnish purchase in addition to sell signals for private stocks based upon their bicycle models.  They also stimulate got toll forecasts for each stock in addition to ETF.  I've constitute those forecasts for SPY to stimulate got value in addition to stimulate got backtested them for the improve operate of ii years.  At present, their forecast is bullish for stocks over a adjacent two-week horizon.


Thursday, Nov 26th

*  Happy Thanksgiving in addition to many cheers to readers!  I aspect frontward to a dandy 2016.  This latest article describes a structured procedure for dealing positively alongside setbacks in addition to failure.  So much of the departure betwixt the successful trader in addition to the unsuccessful 1 is how they bargain alongside the inevitable losses dealt past times markets (and past times our faulty processing of market-generated information).

*  We've continued modestly higher inwards overnight trade, equally the basic strategy of buying weakness that holds higher upwards key prior twenty-four hr catamenia in addition to overnight levels has been a practiced one.  The relative outperformance of little caps is something I'm watching.  Utility stocks, faced alongside the prospect of rise rates inwards the U.S., stimulate got been relatively weak.  Below, the graphic from the splendid FinViz site shows mixed surgical procedure amidst U.S. sectors.  It continues to move a rotational environment.

*  On a to a greater extent than global scale, I'm watching the relative surgical procedure of China, emerging markets, Japan, in addition to European stocks, given the prospect of farther easing from overseas cardinal banks in addition to a charge per unit of measurement hike from the Fed.  Note the relative forcefulness of the U.S. dollar of late; that is also a theme that is impacting U.S. shares.  I know besides many traders who are in addition to so busy looking for short-term setups that they completely immature lady larger themes that are driving stocks on the longer fourth dimension frame. 

Wednesday, Nov 25th

*  We tested the overnight lows inwards early on merchandise yesterday in addition to constitute rigid buying off the lows, bringing us dorsum toward the upper halt of the recent range.  The inability to sustain weakness is consistent alongside a marketplace seat inwards a rise cycle, though I do detect tepid breadth therefore far inwards the motion higher.  For example, the past times duo of days, we've seen to a greater extent than stocks register fresh 52-week lows than highs.  While I do recollect nosotros stimulate got a practiced chance to attempt out recent highs, I am far from convinced that we're launching to a fresh bull leg from here.  

*  Dec promises to move an eventful month, alongside ECB in addition to Fed meetings that could Pb to monetary easing in addition to an involvement charge per unit of measurement hike, respectively.  I recollect it's possible that, alongside a dovish Fed hike in addition to monetary ease inwards Nippon in addition to Europe, nosotros could reckon a renewed "QE" merchandise inwards stocks.

*  The nautical chart of cumulative upticks vs. downticks amidst all listed stocks (red delineate of piece of job below) has been heading to novel highs.  That reflects relative forcefulness late amidst smaller cap issues.  Interestingly, the cumulative upticks vs. downticks for Dow stocks exclusively is inwards a recent downtrend.  This rotational merchandise could good boot the bucket on through this vacation period.

Tuesday, Nov 24th

*  Yesterday's merchandise was interesting inwards that nosotros saw considerable buying involvement inwards early on trade, equally tracked past times NYSE TICK, but much of the forcefulness centered on smaller cap issues in addition to non the NASDAQ in addition to SPX large caps.  What turns a bull, rise stage of a marketplace seat bicycle into a topping stage is that buying involvement fails to accept prices meaningfully higher, equally around segments of the marketplace seat display weakness equally others concord up.  In yesterday's trade, it was the NASDAQ index--and AAPL specifically--displaying weakness.  As buying failed to force indexes higher, sellers came inwards during the afternoon in addition to took us lower.  Yesterday's merchandise was a squeamish illustration of how markets plough on a brusque fourth dimension frame.  It was also a squeamish illustration of how it's of import to rail multiple marketplace seat sectors, non simply the index you're trading.

*  Painful sense has taught me to non move long stocks alongside pure volatility (volatility per unit of measurement of trading volume) is low.  Forward returns simply aren't positive on average.  As you lot tin reckon below, pure vol had gotten quite depression recently, a xanthous caution light.  With the downing of the Russian jet overnight inwards Turkey, stocks stimulate got fallen dorsum in addition to taken out stops inwards the 2070s inwards the ES futures.  Pure vol has expanded meaningfully.  Adjusting volatility expectations in addition to risk/reward is key here.  On 1 hand, corrections that get upwards pure vol offering practiced entry points on the long side.  On the other hand, nosotros at nowadays stimulate got a province of affairs where idiosyncratic (geopolitical) factors are moving markets.  It is hard to successfully merchandise historical patterns when idiosyncratic conduct chances factors dominate.  I'm opened upwards to buying weakness that cannot accept out the overnight lows, but inwards no rush to larn involved.  

Monday, Nov 23rd

*  How much fourth dimension do nosotros waste product in addition to how much mental clutter do nosotros do past times staring at screens, opening superfluous email, in addition to reading cloth irrelevant to our conclusion making?  How does that clutter clog creative processes in addition to interfere alongside generating novel in addition to improve ideas in addition to trades?  This post on media consumption tackles a really of import topic: nosotros can't get together practiced ideas if we're non collecting the right puzzle pieces.

*  We're trading inwards a relatively sideways gain inwards the ES futures, correcting to a greater extent than inwards fourth dimension than inwards price.  That is mostly what markets do when they're trading inwards a practiced uptrend, in addition to that's how I'm treating this marketplace seat until proven otherwise.  The exclusively flies inwards the ointment are depression levels of implied correlation in addition to pure volatility, both of which are associated alongside subnormal near-term returns.  My basic strategy, equally has been the instance recently, is to purchase weakness that holds higher upwards overnight in addition to prior day's lows.

*  I mostly similar to purchase oversold levels inwards rise markets in addition to sell overbought levels inwards falling ones.  Influenza A virus subtype H5N1 large portion of profitability comes from practiced entry execution.  The same applies to move out execution.  When positions become our agency but are stretched to the upside or downside, it mostly pays to accept at to the lowest degree around of our seat off inwards markets that display short-term hateful reversion.  I aspect at a medium term charge per unit of measurement of alter stair out on bars created every 500 toll changes to furnish perspective on overbought in addition to oversold.  It's non something I merchandise off of directly, but utilisation to mostly guide practiced in addition to bad merchandise location.