Info!! Using Breadth To Assess Marketplace Set Forcefulness Together With Weakness

This is the tertiary ship service inward my indicator series.  The first took a expect at tracking minute to minute buying as well as selling pressure level inward stocks; the second extended the expect at demand as well as provide to a slightly wider fourth dimension frame.  Here nosotros conduct keep an fifty-fifty larger perspective to stance a sensitive mensurate of marketplace breadth:  the discover of stocks making novel three-month highs minus the discover making fresh three-month lows across all listed stocks (red line).  (Raw information from the Barchart site).  I honour the one-month as well as three-month breadth numbers to a greater extent than sensitive to shifts inward marketplace line as well as weakness than the traditional 52-week figures.

Strength versus weakness inward the high/low numbers tells us whether the broad marketplace is gaining or losing line equally the index moves higher or lower.  Early inward marketplace cycles, we'll encounter breadth expand equally the index makes novel highs; breadth volition contract equally the index makes fresh lows.  As cycles mature, nosotros start out to encounter sector rotation as well as breadth no longer rails the directional stimulate of the index.  Thus, for example, we'll encounter situations similar the left side of the chart, inward which bounces inward breadth cannot attain fresh index highs as well as so novel lows inward the index laissez passer on on improved breadth.  Those breadth divergences, coming belatedly inward marketplace cycles, are worth tracking for potential reversal moves.

Notice at that spot are other times, such equally next the recent the United States of America election, inward which breadth moves sharply higher equally stocks rally.  This is typical of the early on phases of marketplace cycles as well as is to a greater extent than frequently than non followed past times farther momentum.  The solid position down of marketplace breadth hence helps us distinguish periods inward which nosotros desire to merchandise momentum patterns versus value ones.

Whereas the uptick/downtick stats give us a short-term moving painting of demand as well as supply, the daily breadth stats are helpful inward viewing the market's larger picture.  Some of the best trading opportunities arise when short- as well as longer-term pictures align.

Further Reading:  Tracking Breadth Across Market Cycles
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Info!! Finding Chance Inwards Stock Marketplace Pose Cycles

The recent post suggested that a diverseness of marketplace seat observations tin displace live on pulled together past times drawing upon an explanatory framework.  Influenza A virus subtype H5N1 proficient theory non alone helps us empathize what has happened inwards markets; it too suggests what nosotros mightiness notice inwards the future.  Science begins with observation.  Until nosotros link our observations too brand feel of them, they stay isolated information points.  Theory is a large business office of what transforms information into explanation.

What my observations advise is that a express release of variables, such every bit buying too selling pressure; volatility; breadth; sentiment; too correlation, uniquely predict short-term cost receive inwards the stock market.  An ongoing query involvement has focused on the construction of cycles inwards the stock market too the co-movement of these variables at unlike phases of marketplace seat cycles.  In general, I reveal that marketplace seat cycles tin displace live on broken downward into several phases:

1)  Bottoming process - At marketplace seat lows, nosotros tend to consider an elevation of book too volatility too a high flat of marketplace seat correlation, every bit stocks are dumped across the board.  Selling clit per unit of measurement area far exceeds buying clit per unit of measurement area too persuasion becomes quite bearish.  At of import marketplace seat bottoms, nosotros consider cost lows that are non confirmed past times marketplace seat breadth, every bit stiff stocks laid out to diverge from the pack too attract buying interest.  At those bottoms, nosotros too reveal a ascent inwards buying clit per unit of measurement area too a reduction of selling pressure, every bit fresh marketplace seat lows neglect to attract novel selling interest.  

2)  Market rise - With the drying upwards of selling, depression prices attract buying from longer timeframe participants every bit good every bit shorter-term opportunistic ones.  The marketplace seat rises on stiff buying clit per unit of measurement area too depression selling pressure, too the ascent generates sufficient thrust to generate a proficient grade of upside momentum.  Volatility too correlation stay relatively high during the initial elevator off from the lows too breadth is strong.  Dips are bought too the ascent is sustained.

3)  Topping process - The marketplace seat hits a momentum peak, oftentimes identifiable past times a peak inwards the release of shares registering fresh highs.  Selling from this peak to a greater extent than oftentimes than non exceeds the flat of selling seen during the marketplace seat rise, but ultimately attracts buyers.  Weak stocks laid out to diverge from the pack too fresh cost highs typically occur with breadth divergences too lower levels of correlation.  New buying lacks the thrust of the before displace from the lows too volatility wanes.  By the fourth dimension nosotros hitting a cost peak for the cycle, divergences are clear, volatility is low, both buying clit per unit of measurement area too selling clit per unit of measurement area are low, too persuasion remains bullish.  

4)  Market decline - Fresh selling creates a pickup inwards correlation too volatility, every bit short-term back upwards levels are violated too selling clit per unit of measurement area exceeds buying pressure.  Breadth turns negative too the volume of stocks directly displace lower.

The thorniest occupation I accept encountered inwards my run with markets concerns the timing relationships with these phases of marketplace seat cycles.  I am convinced that the cycles are aperiodic (they create non adhere to stiff timetables; in that location is no invariant x-day cycle), too I am too convinced that in that location is a non-random proportionality with the phases that occurs inside too across fourth dimension frames.  Capturing this proportionality has been the greatest challenge inwards the research.

The nesting of larger too smaller cycles creates periods of apparent trending too periods of apparent range-boundedness inwards markets.  Optimal trading strategies conform to the parameters of the cycles operating inwards markets at a given time.  Problems occur inwards trading when a trader's belongings menstruum greatly differs from the operative cycle period(s).  Influenza A virus subtype H5N1 mutual occupation inwards trading today's stock marketplace seat is that the operative cycles are much longer than well-nigh active traders' fourth dimension horizons.  This leads to chasing nickles inwards forepart of larger displace steamrollers. 

By tracking the ongoing changes inwards marketplace seat sentiment, volatility, breadth, correlation, too buying/selling pressure, nosotros tin displace seat where nosotros stand upwards inwards a marketplace seat cycle too accommodate trading strategies accordingly.  During marketplace seat rises too declines, nosotros desire to live on belongings positions too going with momentum; during topping too bottoming processes, nosotros desire to live on fading attain extremes too trading to a greater extent than tactically.  In general, nosotros desire to live on aligned with the largest operative cycles, every bit these greatly comport on the shape too timing of smaller cycles.

I am mindful that it is tardily to reveal "cycles" inwards hindsight, with trivial explanatory benefit.  The cycle concept alone has value insofar every bit it organizes observations with fundamental marketplace seat variables too suggests observations to come.  I volition live on elaborating the explanatory too predictive value of cycles inwards futurity posts; it is the major focus of my marketplace seat research.  For an fantabulous illustration of cycle query creating profitable trading strategies, banking company check out the StockSpotter site.

Further Reading:  Market Profile every bit a Practical Theory
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Info!! Altitude Trading Technique Posts

During most of the writing of the blog, I was also engaged inwards my ain trading as well as institute several tools as well as techniques to live on useful.  Below are links to posts I wrote virtually these methods.  If you're interested inwards trading psychology posts, you'll run across relevant links on the Forbes page. 

If y'all can't uncovering the theme you're looking for, y'all mightiness endeavour Googling "" as well as the topic.  That volition frequently clitoris upwardly a few posts, which therefore link to related posts.
  

TOP TRADING TECHNIQUE POSTS:

*  Many Early Posts on Indicators Can Be Found Here

*  This early on site also contains articles on trading methods; run across these articles every bit well

*  Using the NYSE TICK

*  Understanding Market Volume

*  Unique Tools for Processing Market Information

*  Understanding Stock Market Breadth

*  Using Upticks/Downticks for the Dow Stocks

*  Using Relative Volume to Identify Short-Term Opportunities

*  Using Relative Volume to Trade as well as Fade the Market

*  Tracking Instantaneous Demand as well as Supply inwards the Market

*  Tracking Multi-Day Supply as well as Demand

*  Using Breadth to Track Market Strength/Weakness

*  Gauging Market Strength With VWAP

*  Evaluating the Market With Intraday New Highs as well as Lows

*  Why Relative Volume is Important

*  The Importance of Volume inwards the Market

*  Tracking the Market With U.S.A. TICK

*  Using Indicators to Question Strong as well as Weak Markets

*  Identifying Trend Days With Intraday New Highs as well as Lows

*  Catching Trend Days inwards the Market

*  Four Keys to an Upside Trend Day

*  More on Upside Trend Days

*  Identifying Downside Trend Days

*  More on Downside Trend Days

*  Reading Market Cycles

*  Trading Market Cycles

*  Sector Correlation inwards the Stock Market

*  Vol of Vol as well as Trading

*  Time as well as Trading Psychology

*  Tracking Markets inwards Event Time

*  Understanding Markets inwards Event Time

*  Adapting to the Market's True Clock

*  Sites Useful inwards Preparing for Trading

BACK TO THE TRADERFEED HOME PAGE

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Info!! 3 Perspectives On Marketplace Breadth As Well As The Even They Tell

There are several classes of indicators I routinely follow to rail marketplace position forcefulness as well as weakness.  These include measures of sentiment, breadth, momentum, volatility, correlation, as well as marketplace position participation (behavior of large marketplace position participants).  Among these measures, at that topographic point is oft considerable statistical overlap.  Because they are correlated, they are non genuinely criterion dissimilar things.  In an upcoming post, I volition address this outcome past times discussing purified indicators--ones inward which overlap has been removed, as well as then that nosotros are looking at purer forms of sentiment, breadth, etc.  For an inspiring illustration of purification, depository fiscal establishment agree out this newspaper from David Aronson highlighting his structure of a purified VIX measure.

Above nosotros meet iii electrical flow measures of marketplace position breadth.  The transcend nautical chart tracks the amount of 5, 20, as well as 100-day novel highs minus novel lows amid all shares inward the Standard as well as Poor's 500 Index.  The middle nautical chart looks at the average of the percentages of stocks inward that index that are trading higher upward their 3, 5, 10, as well as 20-day moving averages.  The raw information for both these measures come upward from Index Indicators.  The bottom nautical chart displays the amount of stocks across all exchanges that are making fresh three-month novel highs minus novel lows.  

Note that the iii measures nation a like story:  Peaks inward breadth tend to precede cost peaks for intermediate-term marketplace position cycles.  Until recently, successive breadth peaks were occurring at fresh cost highs for the wide market.  During this nigh recent cycle, we've seen lower peaks inward breadth as well as a failure of breadth forcefulness to generate fresh cost highs.  All of this is suggestive of a weakening/topping market, every bit recent buyers bring non been able to sustain the marketplace position uptrend.  

Further Reading:  Tracking Breadth Across Cycles
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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!! Perspectives On Stock Marketplace Breadth

The previous 2 posts convey looked at variables that I convey flora useful inwards tracking short-term displace inwards the stock market:  buying/selling pressure too volatility.  H5N1 tertiary variable I convey flora useful is the breadth of displace amidst stocks. 

There are many ways of tracking breadth.  Of all of these, I convey flora advance-decline lines to endure amidst the to the lowest degree useful inwards predicting frontwards cost movement.  This reflects my to a greater extent than full general sense that the near unremarkably tracked marketplace measures are amidst the to the lowest degree useful, perchance exactly because they are too hence widely tracked.  

Above are 3 breadth measures that I convey flora to endure useful.  The kickoff (top chart) is the publish of mutual stocks across all changes that are making fresh 3 calendar month highs minus those making novel 3 calendar month lows.  (Data available from the Barchart site).  You tin terminate run into that breadth has deteriorated inwards recent days, leading to the near recent marketplace weakness.  You tin terminate also run into that breadth has deteriorated since the early on August decline, every bit the marketplace rally grows increasingly selective.

The 2d mensurate (middle chart) covers all stocks listed on the NYSE too tracks the daily publish that or too hence a higher house their upper Bollinger ring minus those closing below their lower Bollinger band.  (Data available from the Stock Charts site).  This, too, shows a recent designing of deterioration, fifty-fifty every bit stocks moved to novel highs.  

The tertiary breadth mensurate (bottom chart) is specific to the universe of S&P 500 stocks.  It is a composite mensurate of the percentages of SPX stocks trading to a higher house their 3, 5, 10, too twenty solar daytime averages.  (Data available from the Index Indicators site).  What nosotros run into 1 time to a greater extent than is a vogue for this mensurate to peak ahead of price, every bit has happened near recently.

In general, I honor that rigid breadth leads to short-term upside momentum, followed yesteryear reversal.  Weak breadth leads to short-term downside momentum at of import marketplace bottoms (i.e., bottoms of longer-term marketplace cycles) too short-term reversal at marketplace corrections.  In a qualitative sense, these measures reach me a moving painting on whether markets are getting stronger or weaker solar daytime over day--very useful data for gauging where nosotros mightiness endure at inwards a marketplace cycle.

Further Reading:   Useful Trading Tools: Breadth
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Info!! Trading Notes For The Calendar Week Of April 25, 2016

Friday, Apr 29th

*  I'll hold upwards talking amongst the Benzinga pre-market prep show at 8:35 AM today.  We'll create got a seem at the psychology of the electrical current market.

*  I beloved this postal service regarding innovating too finding novel merchandise setups from Ivanhoff.

*  Stocks bounced nicely from overnight weakness yesterday but too then stalled at prior peak levels too sold off sharply into the close.  Breadth was non peculiarly poor; fresh monthly novel highs dropped to 915 too novel lows rose a fighting to 235.  Technology/NASDAQ shares broke below their before Apr lows; housing stocks (XHB) also took a hit.  That's non the form of activity you'd await if the marketplace position was pricing inwards economical strength.  Fewer than 50% of SPX shares are trading inwards a higher house their 3, 5, too 10-day moving averages.  Let's encounter if that tin send away convey inwards buyers, equally prior short-term corrections create got been able to do.

*  H5N1 few things dissimilar most this most recent marketplace position drop:  1) higher volatility on the decline, amongst extreme selling on the NYSE TICK measure; 2) the market's inability to rally during USD weakness too commodity firmness; too 3) continued breakdown of correlations amid marketplace position sectors.  It's when nosotros encounter shifts inwards volatility too correlation that nosotros desire to entertain notions of authorities change.

*  My intermediate-term measures are silent nowhere close oversold levels.  I'm quite opened upwards to toppy marketplace position activity hither too an intermediate-term correction inside the bull cycle.  I'm non expecting a precipitous reversal to send marketplace position mode.  Note the precipitous rising inwards VIX.  My Pure VIX model has turned neutral; non yet inwards "fearful" territory.

Thursday, Apr 28th

*  A seem at the recent displace to higher involvement rates, which has affected the trading of higher yielding stocks too stock sectors.

*  Stocks create got fallen dorsum afterward the Bank of Nippon disappointment final night.  We're right away close the lower terminate of the recent trading range.  I haven't noticed item breadth weakness.  Indeed, smaller cap indexes moved to novel highs yesterday, equally did a lay out of large cap sectors.  Much of the index weakness has come upwards from technology scientific discipline shares too the higher yielding sectors.  New monthly highs rose to 1112; novel lows rose a fighting to 209.  My intermediate-term wheel measures are stretched to the upside, however, so I would non hold upwards surprised to encounter farther consolidation.

*  Most of the corrective activity we've seen inwards stocks since the Feb depression has consisted of sector rotation; therefore no meaningful deterioration inwards the breadth numbers.  Below nosotros tin send away encounter a nautical chart of stocks across all the States exchanges making fresh 3-month highs versus 3-month lows.  It has stayed good for yous throughout the recent move.  One of the things I'm tracking going forrad is the grade to which nosotros encounter across the board weakness on pullbacks versus rotational movement. 

Wednesday, Apr 27th

*  Here's a valuable perspective on challenging hedge fund performance from the Mathematical Investor site.

*  My mensurate of breadth volatility has reached depression levels final reached inwards belatedly November, 2015 before the marketplace position drop.  Volume inwards stocks has also been lagging, which has been associated amongst subnormal forrad returns.  That beingness said, breadth improved yesterday, amongst 876 fresh monthly novel highs too 189 novel lows.

*  Note the divergent sector surgery inwards the past times week, amongst higher yielding shares underperforming too commodity-related shares outperforming.  (Graphic from FinViz).  Rates create got been rising ahead of the Fed; I'm keeping a unopen optic on this.  Note also how technology scientific discipline has been lagging.  Rising rates?  Higher commodities?  Low growth?  Can't imagine a stagflation scenario would hold upwards a non bad one...

Tuesday, Apr 26th

*  Excellent interrogation links from Abnormal Returns.  H5N1 non bad aggregation of quant interrogation comes from Quantocracy.  Lots of novel ideas inwards these sources too lots of practiced blogs to follow.

*  So far my trading experiment has been interesting.  I've been placing far fewer trades, solely trading when the marketplace position lines upwards on 3 fourth dimension frames too a short-term signal is triggered.  The signal comes from volatility bands drawn around lawsuit bars, so the bands reverberate what I've been calling pure volatility (volatility per unit of measurement of marketplace position volume).  The target is also based upon a motility inwards pure volatility units.  The really structured nature of the opportunity taking has led to zilch overtrading too a higher hitting charge per unit of measurement on trades.  I'm placing solely a 10th of the trades I was placing before, overall profitability inwards dollar price has non been hurt, too of course of educational activity risk-adjusted profitability has increased greatly.  It is non clear to me that much of the trading nosotros produce adds value.  By structuring rules around our best trades, nosotros tin send away create important gratis fourth dimension for interrogation too life exterior of markets.

*  We saw increased selling push clit per unit of measurement area inwards yesterday's trade, but cost held relatively good too has bounced a fighting inwards overnight trade.  New monthly highs dropped to 586 too monthly lows also dipped to 208.  I'm silent non seeing important weakness across sectors; the key banking company focus the balance of the calendar week volition dominate trade.  

*  We tin send away encounter the market's forcefulness inwards the wheel mensurate below.  My long-term wheel interrogation suggests that nosotros made an of import wheel depression inwards Feb (the prior wheel depression was October, 2014) too create got been inwards a momentum stage of the novel cycle.  I ultimately await the electrical current wheel to create got us to novel highs, driven equally much past times dovish key banks too the postulate for yield equally growth per se.

Monday, Apr 25th

*  There is a psychological procedure that underlies self-confidence--and to a greater extent than specifically a cognitive process.  Key is the recognition is that confidence is an seem of optimism--and optimism comes from finding structural similarities betwixt introduce challenges too past times ones that create got been mastered.  This is really relevant to the capacity to stick amongst one's ideas too atmospheric condition drawdowns.

*  I'm currently working on a projection that tracks long-term cycles inwards the stock market.  These cycles extend for months, non minutes or days.  It is at this horizon that momentum effects most clearly emerge.  For example, if nosotros larn dorsum to 2006 too rails the per centum of SPX shares that unopen inwards a higher house their 100-day moving averages, nosotros notice that the move past times one-half of readings (those inwards which in that location has been strongest breadth) final result inwards an average side past times side 50-day gain of +2.15%.  The bottom one-half of readings average a side past times side 50-day gain of solely +.33%.  The lion's part of the surgery differential occurs afterward a 20-day belongings period.  Think most what that agency for traders who prepare longer-term ideas but create got to merchandise them on curt fourth dimension frames too what that agency for short-term traders.  Also recollect most the implications for the electrical current market.

*  Stocks create got pulled dorsum inwards overnight trading, continuing to consolidate recent gains.  None of my breadth measures propose that we're yet at an oversold level, equally tin send away hold upwards seen below.  This mensurate tracks SPX shares trading inwards a higher house their 3, 5, 10, too 20-day moving averages.  (Raw information from Index Indicators).

Info!! Tracking Existent Fourth Dimension Marketplace Reckon Through Purchase In Addition To Sell Programs

In past posts I've mentioned that I rail a handbasket of institutional favorite stocks too monitor upticking too downticking across the grouping every infinitesimal of the trading day.  The logic is that when large marketplace position participants desire to purchase or sell with urgency, they volition elevator offers or hitting bids across a hit of liquid stocks.  This simultaneous upticking or downticking across a hit of shares--the execution of purchase programs too sell programs--leaves a footprint that provides a really useful catch of instantaneous marketplace position sentiment.

The top nautical chart tracks sell programs on a rolling one-day Blue Planet from October, 2014 to the present.  Note the expansion of sell programs at relative marketplace position lows too the diminished degree of sell programs at relative marketplace position highs.  That is pretty much what nosotros would await to see.

When nosotros become to the 2d chart, tracking purchase programs, nosotros run across the same pattern, however.  At relative marketplace position lows, nosotros run across to a greater extent than buying activity.  At relative highs, buying dries up.  This is really important.  What makes marketplace position lows is that lower prices attract longer timeframe buyers--the ones who execute inwards baskets.  Volume ramps upwards at relative marketplace position lows because 1 grouping of participants is actively selling too around other grouping is actively scooping upwards the shares instantly offered on sale.  At relative marketplace position highs, zip is on sale too longer fourth dimension frame participants are non incentivized to buy.  Total mass dries up.

It is the 3rd chart, tracking the relative residuum betwixt buying too selling programs, that tells us who is winning the tug-of-war.  At marketplace position lows, sell programs diminish spell purchase programs proceed to fire.  That creates a province of affairs inwards which buying pressure level spikes early on inwards a marketplace position cycle.  (Note that this is what has happened lately inwards the wake of the ECB action).  As a marketplace position rising matures, sell programs get to transcend purchase programs too nosotros run across the residuum betwixt the ii top out ahead of price.  The recent pregnant expansion of programme buying suggests that nosotros should run across upside momentum from recent cardinal banking concern actions.

I included the fourth, bottom nautical chart to brand a split upwards point.  Notice inwards the 3rd nautical chart how nosotros had intensive selling pressure level alongside the institutional favorite shares prior to the recent marketplace position rise.  Despite that, the cumulative NYSE TICK (the amount of upticks vs. downticks across all NYSE shares) stayed potent too instantly has made novel highs.  What that way is that nosotros were seeing intense selling (downticking) alongside the liquid large cap issues, precisely non across the wide market.  It was that discrepancy that ready the recent strength.

I deeply appreciate the involvement readers convey shown inwards the move I convey shared.  These are proprietary measures (all information from e-Signal too all calculation too charting done inwards Excel), precisely I volition update periodically to remain on top of where nosotros stand upwards inwards marketplace position cycles.  I volition likewise hold upwards sharing information most the breadth too stance measures I rail inwards my upcoming book. 

Further Reading:  A Look Back on a Previous Instance of Program Buying Surge
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Info!! Trading Notes For The Calendar Week Of February 15, 2016

Friday, Feb 19th

*  We in conclusion got some pullback inward stocks next the breadth thrust off the lows noted inward yesterday's post.  It was non a wide pullback, however, every bit nosotros genuinely saw marginally to a greater extent than stocks upward on the solar daytime than downwards with NYSE shares.  Among SPX stocks, nosotros soundless had over 90% trading inward a higher house their 5-day moving averages.  I am watching closely what the bears tin sack select to the tabular array here, with an oculus toward seeing how nosotros merchandise nigh yesterday's lows.

*  Stocks making fresh one-month highs across all United States of America of America exchanges create got handily outnumbered stocks making one-month lows for the 2nd consecutive day.  At Thursday's unopen nosotros had 622 novel highs against 145 novel lows.

*  We've bounced on my cycle measures, but are non yet at levels usually associated with intermediate-term marketplace peaks.

Thursday, Feb 18th

*  Yesterday's ship service noted that breadth thrusts next oversold weather tend to Pb to upside momentum inward the nigh term.  That is precisely what nosotros saw on Wednesday, every bit nosotros followed forcefulness with yet some other tendency solar daytime to the upside.  As I've indicated inward the past, recognizing the early on signs of an upside tendency day is extremely useful for short-term traders.  

*  Meanwhile, the breadth thrust off the recent lows has continued inward impressive fashion, i time once again highlighting that we've pose inward an of import depression together with create got embarked on a fresh cycle to the upside.  While it's non odd to larn some push clit dorsum afterwards really extended breadth readings (more than 90% of stocks inward a higher house their short-term moving averages), those dips are mostly meant to hold upward bought.  The nautical chart below illustrates the recent breadth thrust.

Wednesday, Feb 17th

*  After some morn weakness, stocks moved higher inward the afternoon together with create got caught a fresh leg higher inward overnight trading, consistent with yesterday's Federal Reserve annotation expecting farther upside follow-through afterwards nosotros made recent lows with pregnant breadth divergences.  We closed Tuesday with really rigid short-term breadth, every bit over 90% of SPX shares closed inward a higher house their 3-day moving averages together with over 85% inward a higher house their 5-day averages. (Data from Index Indicators).  Such upside thrust afterwards weakness is typically followed yesteryear farther strength, leaving a buying of dips the continued operative strategy.  

*  Here is my short-term mensurate of SPX shares making fresh 5, 20, together with 100-day highs versus lows.  It's been a useful overbought/oversold measure.  Note how, despite the recent thrust higher, nosotros are non nigh overbought territory that has been associated with intermediate-term marketplace highs.

*  The intraday tendency organization is on a BUY signal from 4 AM EST together with would striking a sell signal at 1888 on the ES March contract.  The piece of job of the organization is to position intraday swings using number bars; signal levels alter with each novel bar together with conform dynamically for marketplace volatility.


Tuesday, Feb 16th

*  In a novel article, I expand on the sentiment of fourth dimension mapping together with offering a heatmap-inspired example.  This is a technique that is specially useful inward creating the motivation together with momentum to brand changes inward whatsoever surface area of life, personal or professional.  There are many techniques out at that spot inward the self-help literature to assist people change; non thus many methods to assist people honour the travail to sustain change.

*  We've seen some consolidation inward overnight trading afterwards a sizable rally.  Note that Fri closed with exclusively 35% of SPX stocks trading inward a higher house their 10-day moving averages.  Even if the electrical current rally ends upward beingness a bounce inward a broader comport market, I hold off some upside follow through every bit nosotros piece of job off the oversold status from a really weak starting fourth dimension to the year.  

*  I proceed to honour overbought/oversold measures utilizing number bars to hold upward useful inward finding skillful merchandise location together with identifying short-term marketplace cycles.  Below is a elementary rate-of-change mensurate using number bars, where each bar represents 500 cost changes inward the ES futures.  Other number charts that I hold depict the bars on the the world of number of trades together with on the the world of book transacted.  My nearly recent trend-following organization makes utilisation of number bars together with has done quite good identifying intraday swings.  As of this writing, that organization enters SELL style below 1881 inward the March contract.  The purchase together with sell parameters alter with each novel bar together with conform inward existent fourth dimension for marketplace volatility.

Monday, Feb 15th

*  We tested the Jan lows this yesteryear week, but--as noted inward previous postings--breadth divergences were striking.  Specifically, nosotros registered 1226 fresh three-month lows across all exchanges on Th together with 1353 novel lows on Monday.  At the Jan bottom, nosotros saw 2663 stocks brand fresh three-month lows.  Since that test, we've moved smartly higher on Fri together with thus i time again inward overnight trading.  My short-term tendency model is solidly inward purchase style together with has been since Fri morning.

*  An ongoing query projection has been assessing marketplace cycles yesteryear tracking the functioning of all NYSE stocks across a diversity of technical indicators.  (Raw information from stockcharts.com).  The mensurate below takes a volatility-weighted composite of purchase versus sell signals for ii technical systems:  Bollinger Bands together with Parabolic SAR.  Note that nosotros closed Fri at levels some those seen at intermediate-term bottoms together with create got quite a agency to become earlier nosotros run into overbought levels.  

*  Here is yet some other cycle based mensurate derived from breadth information (Raw information from indexindicators.com). Note that it is inward oversold territory, but non at levels seen at nearly intermediate-term lows together with good off overbought levels.  If indeed nosotros create got seen a successful retest of Jan lows, I would hold off marketplace firmness to create got these cycle measures higher.

*  I would position the greatest improvement to my trading every bit coming from focusing away from trends together with directional movement together with instead thinking of cycles together with the transitions from trending to mean-reverting demeanour together with dorsum again.  Influenza A virus subtype H5N1 cycle includes phases of upward together with downward trending, every bit good every bit attain demeanour nigh highs together with lows.  Identifying these transitions--and non getting caught upward inward whatsoever i stage of marketplace behavior--is really helpful to short-term trading.

Info!! Assessing The Recent Stock Marketplace Pose Strength

Stocks moved smartly to novel highs inward the major averages this by week.  Sector rotation was specially noteworthy, amongst old leaders utilities together with consumer staples--defensive together with yield plays--falling behind together with to a greater extent than growth-oriented sectors--consumer discretionary together with raw materials--showing detail strength.  This reflects pull inward U.S.A. of America economical information together with an increased pricing of odds that the Fed volition stimulate to normalize involvement rates afterward this year.

The top nautical chart tracks the divulge of stocks across all exchanges making fresh three-month novel highs vs. novel lows. (Raw information from the Barchart site).  Note that novel highs accept been growing inward recent sessions, simply stay below peak levels seen inward 2014.  This reflects the fact that many sectors, such equally financials, energy, consumer staples, together with healthcare, accept non registered recent novel highs.  Still, I banking concern complaint that relatively few shares are registering fresh novel lows, an indication that buying has been broad-based.  Indeed, the bottom nautical chart tracks the Cumulative NYSE TICK--the cumulative upticks vs. downticks for all NYSE stocks--and shows consistent buying involvement from institutional players.  (Raw information from e-Signal). 

The 2nd nautical chart from the top is my mensurate of intermediate term marketplace strength.  It is a 10-day moving average of SPX stocks making 5, 20, together with 100-day highs vs. lows.  (Raw information from Index Indicators).  It has risen sharply inward recent sessions together with is close a momentum peak.  Note that it is non at all odd for this pull mensurate to top out ahead of cost during intermediate-term marketplace cycles, which way that nosotros could come across farther upside drift fifty-fifty if breadth moderates from here.

The 2nd nautical chart from the bottom shows the divulge of NYSE stocks closing higher upward their upper Bollinger Bands vs. those closing below their lower Bands.  (Raw information from Stock Charts).  It is really mutual for this mensurate to peak ahead of cost during intermediate-term marketplace cycles together with that's what has happened then far.  Note, however, that the Bollinger Balance--the divulge of stocks closing higher upward vs. below their Bands--has remained consistently positive inward recent sessions, reflecting the buying pressure level noted above.

So where does that exit us?  Here are a few observations:

*  We made a momentum depression inward mid-January, amongst the lows inward really early on Feb drying up.  From that point, nosotros accept embarked on a novel intermediate-term upward cycle, which is approaching a momentum peak;

*  Buying pressure level has been pregnant during this close recent upward wheel together with should proceed to propel prices higher, fifty-fifty after nosotros accept made a momentum (breadth) peak for this cycle.  We quest to come across selling pressure level from institutions stimulate to transcend buying pressure level earlier the electrical flow wheel is imperiled;

*  Despite fresh cost highs, many sectors are non making novel highs thence far together with stocks making novel highs are below 2014 levels.  I believe the electrical flow upswing is business office of a wide topping formation inward stocks together with non a fresh bull marketplace leg; a pregnant expansion of novel highs beyond 2014 levels would contradict that view;

*  In my electrical flow base of operations instance scenario, nosotros proceed to drift higher on upward buying momentum, simply ultimately volition top out together with supply to the belatedly 2014 trading attain equally business office of the market's broader topping.

This is a full general roadmap; a wide hypothesis rather than a difficult together with fast conclusion.  As always, I volition survive tracking the marketplace mensurate together with updating that roadmap.

Further Reading:  Views of Market Breadth
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