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

Friday, March 18th

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

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

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

Thursday, March 17th

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

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

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

 

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

Wednesday, March 16th

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

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

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

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

Tuesday, March 15th

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

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

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


Monday, March 14th

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

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

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

Info!! 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!! Trading Notes: Calendar Week Of November 9Th

Friday, November 13th

*  We started Th weak but non yet at levels corresponding to intermediate-term oversold.  The resulting strategy of selling bounces that could non get got out prior (overnight) highs worked really good during the day, equally nosotros shut weak together with right away get got traded lower during overnight hours. As I mentioned a piece ago, I'm impressed  yesteryear the fact that many marketplace moves are offset during London hours together with non during the U.S. twenty-four hours session.  My working hypothesis is that moves inwards stocks *will* endure anchored inwards London during periods inwards which the top dog drivers of stock prices are macro-related.  Recently, the merchandise inwards stocks has been less nigh turn a profit together with U.S. economic scheme together with to a greater extent than nigh currencies, involvement rates, together with cardinal banking concern dynamics.

*  With the recent weakness, we're much closer to intermediate-term oversold levels per the nautical chart below, but non quite at that spot across many indicators I track.  The opportunity with selling the bounces downward hither is that the short-covering rallies tin endure to a greater extent than violent.  Waiting for short-term overbought weather condition that come about at lower highs together with beingness nimble on exits makes feel equally a twenty-four hours timeframe strategy.

*  One implication of the macro driver thought to a higher house is that tracking how other, correlated assets are trading (commodities, USD, rates, etc.) tin give about clues equally to how stocks may bear going forward.  The higher rates, stronger dollar, weaker commodity province of affairs has non been practiced for stocks.

Thursday, Nov 12th

*  I'm spending the twenty-four hours at the trading desk accompanying a really accomplished trader.  Will most probable alive tweet marketplace observations.  Stock Twits handle is @steenbab.

*  We've made a twosome of attempts to bounce off Monday's lows together with none get got been sustained.  Indeed, my breadth measures get got modestly deteriorated during that fourth dimension together with I'm soundless non showing us at levels that get got corresponded to intermediate-term oversold conditions.  All that suggests to me that nosotros are vulnerable to a downside break.  My leaning is to sell bounces that cannot get got out the overnight highs.

*  In general, nosotros tend to run across elevated levels of pure volatility (volatility per unit of measurement of marketplace volume) at marketplace lows together with depression levels at marketplace peaks.  Interestingly, we're much closer to levels associated with tops than bottoms.

*  I snuff it along to endure impressed yesteryear how the vigorous rally inwards stocks has seemingly hitting a wall inwards the wake of rising rates together with a stronger dollar.  That dynamic is really much on my radar.

Wednesday, Nov 11th

*  Tuesday attempted follow-through on Monday's selling, but at that spot were divergences with the sectors relative to beingness able to suspension Monday's lows.  The SPX held to a higher house those lows inwards a marketplace noted yesterday to endure short-term oversold.  That led to tardily twenty-four hours buying which has continued overnight.  I'm viewing this equally business office of a topping procedure together with would endure surprised to run across a strong, fresh bull leg here.  Buying weakness that holds to a higher house overnight together with previous day's lows inwards anticipation of testing recent highs makes feel equally a short-term strategy.  I would lighten upwards on pull that leaves us with upside divergences.

*  Where I'm finding about of the best short-term trading opportunities inwards the stock indexes is when nosotros acquire overbought or oversold weather condition followed yesteryear an inability of stocks to snuff it along their upward or downward trajectory.  At such points bulls or bears are committed together with the marketplace cannot displace farther inwards their direction.  That leads to selling or curt roofing that benefits traders buying at the oversold points that can't snuff it lower or selling at the overbought points that can't snuff it higher. 

Tuesday, Nov 10th

*  Monday's marketplace was anything but rotational, equally early, wide selling persisted through the morning. An of import agency of recognizing such a shift is yesteryear tracking the early on distribution of NYSE TICK values, which justice the give away of upticks versus downticks with all NYSE shares.  When that distribution is skewed to the downside together with SPX stays persistently below its opening cost fifty-fifty during periods of upticking, it's an early on sign that sellers are inwards control.  Another "tell" for weakness is tracking how the diverse sector ETFs are trading relative to their opening prices.  If they are dominantly trading downward from their opens together with advance-decline numbers are weak, you lot know that this is a broader selloff together with non business office of mere rotation.

*  The selling has left us short-term oversold, with fewer than 20% of SPX shares trading to a higher house their iii together with 5-day moving averages.  It is non at all odd to acquire a bounce from such oversold levels.  Should nosotros exam yesterday's lows, I volition endure watching breadth together with TICK values closely to run across if selling pressure level is continuing or waning.  Meanwhile, nosotros are non oversold on an intermediate-term basis, per the nautical chart below, which tracks the give away of SPX stocks making fresh 5, 20, together with 100-day novel lows.  (Raw information from Index Indicators).  My working assumptions are that this correction has farther to snuff it but too that the bull leg from tardily September has farther to go.  

Monday, Nov 9th

*  How do nosotros brand changes inwards our lives?  In our trading?  In our emotional responses to trading?  In our relationships?  If it was equally tardily equally setting goals together with motivating ourselves with positive thinking, the psychology together with self-help sections of bookstores would endure quite a fighting smaller.  I believe the recent Forbes post is i of my to a greater extent than of import ones.  The thought is that, inwards a sense, nosotros never actually alter ourselves.  Instead, nosotros larn to supervene upon i laid of motivations--the ones that Pb to undesired actions together with consequences--with an existing, stronger laid of motivations.  In other words, nosotros alter yesteryear acquire to a greater extent than of who nosotros already are.  

*  We snuff it along with a rotational market, with about sectors late potent (financials, little caps) together with others weak (interest charge per unit of measurement sensitive utilities together with consumer staples shares).  (See the graphic from FinViz below).  Across all stocks, however, we're seeing an increasing give away making short-term novel lows.  Fri saw 752 stocks across all exchanges register fresh monthly highs, but too 540 brand novel monthly lows.  That's the most novel lows since early on October.  Longer term, a rotational correction that does minimal harm to the overall indexes would endure a addition for stocks.  Short term, I suspect this correction has farther to go.  My leaning is to sell bounces that cannot get got out prior overnight together with previous day's highs, but I too excogitation to fade weakness that cannot yield fresh cost lows together with expansion inwards the give away of stocks making novel lows.  In short, I'm treating this equally a rotational, attain marketplace until demonstrated otherwise. 

*  Influenza A virus subtype H5N1 large business office of the rotational dynamic, of course, is the recent displace higher inwards involvement rates together with inwards the U.S. dollar on the heels of potent economical numbers together with growing conviction of a Fed charge per unit of measurement hike.  Watching the currency together with rates markets volition endure of import inwards gauging moves for stocks overall together with for the sectors most impacted yesteryear rates.  My best guess is that the markets are doing the Fed's hiking for it, that Dec volition convey an uber-dovish hike, together with that nosotros volition snuff it along with cardinal banking concern dubiety into 2016.  It is non clear to me that the Fed volition wish an extended displace higher inwards the dollar if a destination is to maintain increment together with inflation on target.

Info!! Trading Notes: Calendar Week Of November 30Th

Friday, Dec 4th

*  Well, ECB did halt upwards giving us a surprise together with it was every bit much inwards the tone of the press conference every bit the content of the decision.  My accept is that the fundamental banking concern sent a message that they volition non hold upwards bullied past times markets together with all the commentary on how the banking concern "needs to deliver."  The message from the press conference was that they are delivering the promised monetary stimulus, that this is enough, together with that nosotros should hold upwards patient together with allow it work.  Markets were positioned for to a greater extent than aggressive activeness together with nosotros had quite the selloff inwards the euro together with inwards stocks together with bonds.  We direct hold the payrolls written report this AM together with and then the Fed enters a placidity menses ahead of its meeting.  All inwards all, amongst a moderate ECB together with a Fed poised to hike, in that location isn't a big fundamental banking concern tailwind for stocks.

*  Yesterday I noted the deterioration inwards breadth together with that clearly extended yesterday.  We had 350 stocks across all exchanges register fresh monthly highs against 699 lows.  That was the highest set out of stocks making monthly lows since Nov 16th.  We're extended to the downside on a short-term terra firma amongst fewer than 20% of stocks trading higher upwards their 3, 5, together with 10-day moving averages (raw information from Index Indicators), so a short-term bounce is quite possible.  As the nautical chart of overbought/oversold SPX stocks indicates below, however, nosotros are non yet at an intermediate-term oversold point.  That has me inwards the manner of selling marketplace bounces.

Thursday, December 3rd

*  So far, no keen surprises from ECB; press conference coming up.  I'm non certain there's anything to alter the broader dynamic of depression rates together with weak currency inwards Europe.  If nosotros consider a dovish charge per unit of measurement hike from Fed, 2016 could convey to a greater extent than QE-style merchandise to stocks together with shares amongst yield could honor some support.  It's a subject I'm mulling over for the novel year.

*  That beingness said, yesterday traded quite weak.  Note on the relative book nautical chart of yesterday's merchandise below how the attempted bounce from the early on selling constitute piffling interest.  We bounced overnight, but we're overbought on an intermediate-term basis.  That has me selling bounces that cannot accept out overnight together with prior day's highs.

*  I was struck yesterday past times the fact that nosotros had 54 stocks brand 52-week highs together with 78 register annual lows.  Not impressive breadth.
Wednesday, Dec 2nd

*  From the start of Tuesday's session nosotros could consider fresh buying flows locomote inwards the market, amongst elevated NYSE TICK readings.  This was a clear interruption from recent activeness together with ultimately led the marketplace to novel cost highs for this move.  The set out of stocks closing higher upwards their upper Bollinger Bands hitting their highest grade since Nov 2d together with breadth was corporation (see nautical chart below).  If this is the start of a genuine leg up, nosotros should rest higher upwards the recent trading make together with add together to yesterday's gains.  The reply to tomorrow's ECB activeness may play a purpose inwards that.  Given mostly overbought levels inwards my cycle measures, I'm non wedded to the upside breakout idea, but volition hold upwards watching breadth closely.

*  I maintain to implement the alter inwards my trading inwards which I view the hours inwards Asia, Europe, together with U.S. every bit distinct trading "days".  All positions are opened together with shut inside their "days", so that in that location is no supposition of continuity across fourth dimension zones.  I honor the flows together with cost patterns to hold upwards quite dissimilar from i fourth dimension menses to the next, but create honor consistency inside each zone.  This has helped risk management together with has too helped me locomote to a greater extent than flexible inwards trading ranges.  The emergence of the buying flows early on inwards yesterday's U.S. session was a adept illustration inwards point.

Tuesday, Dec 1st

*  We saw weakness inwards stocks yesterday, followed past times belatedly twenty-four hours strength, only to autumn dorsum into the make inwards overnight trade.  During this extended range, we're seeing overbought levels inwards my cycle measures together with breadth has been waning (see nautical chart below; raw information from the first-class Index Indicators site).  Trading the make (fading short-term overbought/oversold readings) has been what's been making coin so far together with it's been a brand it/take it market.  With all eyes on ECB on Th together with payrolls on Friday, I suspect we'll direct hold plenty of volatility to interruption the range.  As nosotros larn to the upper halt of the recent range, I'm non enamored amongst the risk/reward.  I'm too non inclined to accept big bets ahead of events afterward this week, which mightiness hold upwards the view of other marketplace participants...and that could maintain us inwards the make close term.

*  Here's a study that I've undertaken that I believe volition hold upwards of value inwards 2016 performance.  I'm looking at the trajectory of my winning together with losing trades.  How speedily create the winners plough into winners?  How speedily create losers locomote losers?  If a merchandise is non profitable after X minutes, what is the likelihood it volition hold upwards profitable at all?  If a merchandise is nether H2O after X minutes, what is the likelihood it volition come upwards back?  What is the trajectory of the marketplace after my exits?  Is my entry together with larn out execution providing value?  My initial findings are that losing trades pretty much start out every bit losing trades.  If I don't larn stopped out after a menses of time, the best class of activeness is to add together to the trade.  Winning trades don't ever start every bit winning trades, but frequently start every bit not-losing trades.  In other words, a marketplace may bounce simply about inwards a make earlier going my way.  That does hand opportunities for adding to positions.  Tracking the added value of those added positions is yet some other study I volition hold upwards undertaking.  More on this shortly to come--


Monday, Nov 30th

*  How far tin nosotros accept functioning if nosotros operate amongst real tuned minds together with bodies?  Most of us assume that nosotros direct hold to operate difficult together with operate long hours together with this agency operate must accept a toll on hear together with body.  But if nosotros prioritize hear together with body, mightiness nosotros operate much amend together with smarter?  Might nosotros alive happier together with to a greater extent than fulfilled lives?  Perhaps we're going close evolution together with functioning inwards alone the incorrect way...

*  Stocks bounced off early on lows inwards Friday's partial session, but remained below recent highs.  I maintain to hold upwards underwhelmed past times marketplace breadth so far.  The maximum set out of novel monthly highs registered terminal calendar week was 589 on Wednesday, good below the 953 achieved inwards the get-go calendar week of the month.  We direct hold ECB on Th together with the terminal jobs numbers on Fri earlier the Fed coming together this month.  I volition hold upwards watching closely for bear witness of the recent marketplace line broadening vs. rolling over.  My mensurate of intermediate-term marketplace line has non yet crested for the electrical flow cycle, per the nautical chart below.

 *  High yield bonds maintain to combat per the nautical chart of JNK below.  At some point, I suspect this volition accept forepart together with oculus stage.  It's non a bull marketplace dynamic.

Info!! Indicator Update For November 24Th

Last week's indicator review concluded that "while recent selloffs bring non been every bit wide together with sustained every bit inward early on October, neither are nosotros yet getting indications of sustained buying interest. Until that occurs, it is premature to assume that a durable intermediate-term bottom is inward place." What followed inward the past times calendar week was a broadening of the reject together with a move, non solely to novel comport marketplace lows, simply besides below the comport lows of 2002/2003.

Sentiment, every bit measured past times the Cumulative NYSE TICK, has been quite bearish during the past times week; toll weakness has extended to all major sectors. The Cumulative Demand/Supply Index, which to a greater extent than oft than non does an first-class chore of tracking intermediate-term marketplace highs together with lows (top chart), is dorsum at levels from which we've typically seen intermediate-term rallies. Note, however, that nosotros proceed to come across a designing of highs together with lows inward the Cumulative DSI corresponding to lower toll highs together with lower toll lows. That is typical activeness inward a longer-term comport market.

The reveal of NYSE, NASDAQ, together with ASE stocks registering fresh 65-day lows expanded dramatically concluding calendar week (bottom chart), hitting its most extreme order since the instant calendar week of October. Once again, the weakness was quite broad. On Thursday, for example, most 1100 NYSE mutual stocks made fresh 52-week lows; 300 of the S&P 500 stocks together with 323 of the S&P 600 modest caps besides made annual lows. The advance-decline business specific to NYSE mutual stocks together with the business for the ii S&P averages all made fresh comport marketplace lows this past times week; coin menses for the Dow Jones Industrial stocks was negative on the week.

In short, nosotros bring been quite weak, nosotros are at oversold levels that bring corresponded to intermediate-term rallies, simply together with then far the indicators are inward clear comport marketplace modes. To laid about a bottoming process, nosotros require to showtime come across a sustained rally on corporation breadth, cumulative TICK, together with coin menses prior to whatever farther testing of lows. To this point, rallies bring been short-lived together with bring non been accompanied past times sustained, positive coin flow. We saw a corporation coin menses rally belatedly on Friday, together with nosotros are trading higher today every bit I write. I volition last tracking the indicators closely each AM via Twitter to come across if this rally differs from the ones previous.
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Info!! Tracking The Psychology Of The Marketplace Amongst Number Flow

When nosotros intend of trading psychology, nosotros typically intend of the psychology of the trader as well as the factors that either contribute to or distract from a peak functioning mindset.  Another facet of trading psychology is reading the intentions of other marketplace players.  This is real similar to psychology inwards poker.  The mindset of the poker instrumentalist is important, as well as it is also of import to read the psychology of the other players at the table.  The skilled poker instrumentalist reads those tells from other players to infer if they are bluffing or if they mightiness survive asset the nuts.  When short-term trading/market making occurred on the trading floor, reading the other participants inwards a marketplace really was to a greater extent than similar reading other poker players.  With nigh marketplace activity existence electronic, nosotros involve other ways of inferring the intentions of marketplace participants.

Above nosotros encounter a nautical chart of what I refer to every bit Event Flow for yesterday's session inwards the ES futures (6/12/17).  I volition survive discussing this mensurate during this afternoon's costless webinar as well as inwards especial item at this summer's workshop inwards Chicago.  (Here are details regarding the webinar as well as workshop).  In a nutshell, what I'm doing alongside consequence period of time is breaking downwardly the day's activity into volume-based events, where each bar represents the cost activity of each grand contracts traded.  What I'm interested inwards is the cost behaviour *within* each bar.  If cost closes to a greater extent than toward the high goal of the bar, I volition categorize that bar every bit a "buying" bar as well as vice versa.  The nautical chart depicts a cumulative running total of buying as well as selling bars, inwards the agency of an advance-decline line.  

Most of the fourth dimension the Event Flow business volition follow cost relatively faithfully.  It is the divergences that are of especial interest.  Notice, for example, how sellers were dominating inwards the afternoon, simply ultimately were unable to force prices below their morn (and below their previous day's) low.  The inability of sellers to movement cost lower (or vice versa) creates a province of affairs where those participants volition survive forced to comprehend when flows as well as prices turn.  Note the dainty rally inwards ES (blue line) later sellers are trapped inwards the afternoon.

Event Flow is a complement to other ways of inferring the psychology of marketplace participants, such every bit upticks/downticks (NYSE TICK) as well as Market Delta.  Event period of time is easily constructed for whatever musical instrument trading centralized volume.  It is also relatively robust alongside regard to the participation of optimal execution algorithms, every bit noted inwards quant query (see here as well as here).  Algos may survive buying bids as well as selling offers inwards an efficient manner.  This would non necessarily exhibit upwards inwards measures of upticks/downticks simply would survive reflected inwards cost behaviour inside sparse book slices.  Event Flow tin survive aggregated over longer fourth dimension frames to supply bigger motion-picture exhibit views of marketplace participant bullish/bearish psychology.

I've mostly constitute traders much to a greater extent than interested inwards focusing on their psychology, rather than the psychology of the markets they're trading.  That's a large mistake.  Typical cost charts are far besides blunt every bit tools for assessing the psychology of the marketplace.  With Event Flow, nosotros don't get got to rails the marketplace transaction past times transaction simply tin withal obtain a relatively finely grained assessment of how those around the marketplace are behaving.

I hold off frontward to sharing to a greater extent than at the webinar this afternoon as well as the workshop inwards July.

Further Reading:  Tracking the Stock Market With Upticks as well as Downticks 

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Info!! Tracking Intermarket Themes Amongst Barchart.Com

track intermarket themes; major props to the first-class Barchart site for these futures marketplace oestrus maps. Above is the oestrus map for 12:50 PM CT together with and then the map from an hr later. The map shows how major property classes are moving relative to i another; past times tracking the map over time, you lot tin hit the axe run into which groups are receiving buying together with selling interest.

Note how stocks are hit outflow today together with how nosotros run into rattling piffling inward the means of directional intermarket themes on the day. Oil is down, stocks retraced before strength, the dollar together with involvement rates are piffling changed, and--overall--there's non much volatility to the numbers. This is i first-class enjoin for a hit day: if correlated markets aren't trending, stocks oftentimes won't detect distinctive buying or selling interest.
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Info!! Learning From Relative Performance: Lessons From Fixed Income Measures

I of late noted that we tin larn quite a flake from the relative functioning of stock marketplace sectors.  The same is truthful for the relative functioning of fiscal assets inwards general.  How traders in addition to investors deploy their working capital missive of the alphabet speaks volumes regarding take in in addition to perceived opportunity.  Today's post begins a serial on using ETFs to practice informative relative indicators.  In this post, we're looking at a few relevant fixed income ETFs in addition to what nosotros tin larn from their relative performance.

The top nautical chart is a relative mensurate I've tracked for a while:  the relative functioning of high-yielding corporate bonds (JNK) to high character corporate bonds (LQD).  In general, when investors are risk-seeking in addition to experience secure nearly economical conditions, they are willing to make to pursue lower character fixed income assets in addition to obtain higher yields.  Conversely, inwards a risk-averse posture, investors volition flee lower character assets in addition to essay the security of high quality.  This is exactly what nosotros run across inwards the human relationship betwixt JNK in addition to LQD.  Dips inwards that human relationship induce got to a greater extent than oftentimes than non corresponded to risk-off periods inwards the stock market.

Note that JNK:LQD topped out good ahead of the stock marketplace and, indeed, is below the peaks seen inwards 2010 in addition to 2011.  It appears that the make for lower character yield has been diminishing inwards recent years relative to the make for stock marketplace returns.  More on that inwards a bit.

The instant nautical chart takes a aspect at the relative functioning of high character bonds (LQD) to stocks (SPY) overall.  Again, nosotros run across the designing of bonds outperforming during risk-off periods inwards the stock market, but notice how real attenuated this designing has move past times away inwards recent years.  Quite simply, high character bonds induce got been inwards a downtrend relative to stocks inwards the past times few years, inwards business office reflecting the crushing of yields due to the naught involvement charge per unit of measurement policies of the Fed.  (A nautical chart of stocks versus international bonds looks quite similar).  As bonds induce got gone out of relative favor, the volatility of the stock/bond human relationship has decreased notably, in addition to hence that--during risk-off periods--we're seeing less flying to character vis a vis bonds than during 2010 in addition to 2011.

The bottom nautical chart looks at the relative functioning of a higher yielding stock sector (XLU) versus stocks overall (SPY).  Note a similar downtrend in addition to declining volatility, though non every bit pronounced.  The defensive sector all the same tends to outperform during risk-off periods, but every bit these periods induce got been milder inwards recent years, we're seeing less investor flying to safety.

I believe tracking the relative functioning of fixed income to stocks continues to supply information, but anchoring our expectations on relationships nosotros observed pre-2012 would hold upwards a mistake.  Swamping the relative rotations from stocks into yielding instruments has been that Great Rotation that has been anticipated for years:  alongside artificially depression involvement rates, coin has systematically moved from fixed income into equities.  This is a major dynamic underpinning the electrical flow bull market.  After all, fifty-fifty alongside the recent bull marketplace action, stocks all the same yield to a greater extent than than most bond funds.  Amidst real depression bond returns, the flying to character has been replaced past times a flying to opportunity.

I suspect this, too, shall goal badly at or in addition to hence point.  With commodity prices on their dorsum in addition to inflation nowhere inwards sight--and alongside key banks overseas inwards farther asset-buying modes--it is hard to run across yields rising inwards the nigh term.  Should this move past times away on to fuel stock marketplace interest, nosotros could run across shares motion from generous valuations (and rich ones inwards or in addition to hence cases) to unsustainable ones.  One sign of this would hold upwards a similar flying to stocks across Europe in addition to Asia, whose stock markets induce got lately underperformed the U.S., but who similar a shot are farther embarking on their ain currency-devaluing, yield-crushing rounds of property purchases.  

We alive inwards foreign times.  One takeaway from the relative fixed income indicators may hold upwards this:  In a global world, the former stock marketplace wisdom of "Don't acquire by the Fed" has been replaced past times "Don't acquire by the banks."

Further Reading:  Risk Management in addition to Learning from Losses
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