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!! 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 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!! The Bollinger Balance: Tracking Stock Marketplace Pull In Addition To Weakness

Recent posts guide keep focused on ways of gauging broad marketplace pull as well as weakness past times tracking the broad make of private stocks, rather than past times relying alone upon a stock index.  These marketplace gauges include the percent of stocks trading inward a higher house their volume-weighted average prices; the upticks as well as downticks with all stocks trading inward the U.S; as well as intraday novel highs as well as lows with U.S. of America stocks. 

Such measures furnish several advantages.  First, they are a banking concern stand upwards for on the activeness of the capitalization-weighted stock indexes, which tin appear strong or weak only because of the activeness of a relatively modest pose out of highly weighted shares.  Influenza A virus subtype H5N1 practiced event of this was the runup to the July 24th highs inward the large cap marketplace (SPX).  My stair out of fresh three-month novel highs with stocks listed on major exchanges was 636 on June 9th; 836 on July 1st; as well as 363 on July 24th.  That waning upside participation equally a rally matures is a useful agency to guess the relative wellness of the marketplace motion that y'all can't become past times looking at the nautical chart of the index alone.

The minute payoff of these measures is that they furnish prisms through which I tin sentiment as well as empathize the market.  This is where marketplace analysis meets trading psychology.  I download, archive, as well as review all of these indicators every twenty-four hours as well as and then on a larger painting demo footing every weekend.  Day after twenty-four hours of seeing the patterns inward the data--and the relationships with the measures--provides an insight as well as experience into markets that is useful deliberate practice.  

Above is even hence roughly other marketplace stair out I expect at daily that I've dubbed "the Bollinger balance".  (Credit to John Bollinger for insights into this indicator as well as to the Bollinger information tracked on the splendid Stock Charts site.)  In this measure, I only accept the difference betwixt the pose out of NYSE stocks that closed inward a higher house their upper Bollinger Band minus the pose out that closed below their lower band.  What I'm looking for is whether nosotros reckon signs of expanding pull vs. weakness with the broad make of shares.

You tin reckon from clicking the nautical chart inward a higher house that nosotros saw a declining Bollinger residual from early on June through later on July equally the marketplace was topping.  This divergence, along with the many sector divergences as well as divergences inward the novel high/low data, was identifying the waning participation to the upside--a useful heads upwards that the rally was losing steam.  

Fast frontwards to the introduce as well as y'all tin too reckon that the Bollinger residual has straight off been waning to the downside, fifty-fifty equally we've made novel lows inward the major indexes.  We're too seeing fewer shares making fresh three-month lows over the past times several sessions.  This suggests that selling is waning inward terms of breadth--a potentially useful heads upwards for traders gauging the introduce marketplace correction.

Further Reading:  Archived Posts on Market Indicators:  Volume One; Volume Two; Volume Three; Volume Four
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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!! Is This Marketplace Weak, Strong, Non Weak, Or Non Strong?

The recent post service on marketplace position forcefulness too weakness made the representative for looking at forcefulness (buying pressure) too weakness (selling pressure) equally independent variables.  We tin cause got markets inward which both buyers too sellers are active, too nosotros tin cause got ones inward which both are relatively dormant.  By touchstone upticks too downticks across all stocks separately, nosotros tin gain to a greater extent than or less insight equally to the demeanour of both buyers too sellers. 

The 2 charts inward a higher house update views on forcefulness too weakness.  The overstep nautical chart looks at all stocks inside the NYSE universe too tracks those closing inward a higher house their upper Bollinger Bands versus those closing below their lower bands.  (Data from the StockCharts site.)  The thought hither is that inward a potent market, we'll cause got to a greater extent than shares closing inward a higher house their upper bands too vice versa for a weak market.  In a marketplace position inward which buyers too sellers are relatively dormant, nosotros volition encounter few stocks unopen inward a higher house or below their bands.

Note how this is precisely what has happened inward recent sessions:  nosotros cause got had a waning of forcefulness (fewer stocks closing inward a higher house their bands), but non an excess of weakness (net stocks closing below their bands).  At the marketplace position peaks inward July too September, nosotros saw an excess of stocks closing below their bands *prior* to the reaching of an ultimate toll high for those cycles.  In other words, it wasn't simply diminished buying but internet selling that preceded the marketplace position fall.  Markets don't larn weak unless to a greater extent than or less marketplace position components are actively leading the way.

This is similarly reflected inward the bottom chart, tracking the daily residual of upticks versus downticks amid all NYSE shares.  That residual has come upward downwards inward recent sessions, but is nowhere nigh the levels of internet selling pressure level that nosotros saw prior to the Oct drop.  In recent sessions, buying too selling pressure level cause got been relatively balanced; nosotros cause got non seen selling pressure level swamp buying activity.  Again, the takeaway is that markets don't larn weak unless sellers drib dead active too dominant.

To endure sure, small cap stocks cause got been underperforming large caps of late too shares inward the unloose energy sector (XLE) have been understandable laggards, given the pregnant drib inward the value of unsmooth oil.  Thus far, however, weakness inward those areas has non been sufficient to bleed over to the wide NYSE universe.  Buyers are non grabbing bargains equally aggressively equally inward the latter component of October, but neither are sellers taking wages of high prices the agency they were inward September.  With prospects of monetary stimulus nearly of late from China, next Nippon too Europe, prices that looked frothy a couplet of months agone cause got non flora wide selling lately.

Further Reading:  International Stock Performance
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Info!! Reasoning, Preparation, Together With Trading Success

A recent post described a framework for trading inward which evolving marketplace activity (the demeanor of price, volume, together with volatility only about cardinal toll levels) is used to shape ongoing estimates of the odds of touching predefined profits targets. By observing how book together with volatility conduct on upward together with downward movements—and past times gauging the bird of participation inward those movements—we tin obtain a experience for whether merchandise is directional or non-directional together with anticipate continuation together with reversal moves accordingly.

Underlying this framework for trading is a reasoning procedure that synthesizes ongoing information inside together with across markets together with fourth dimension frames. Much of what is learned during the procedure of obtaining marketplace expertise is a refinement of this reasoning process. Psychology becomes of import to trading outcomes insofar every bit it promotes or interferes alongside the reasoning needed to adjust to the flows of market-generated information.

The reasoning process, however, begins earlier markets opened upward every bit constituent of the trader’s daily preparation. By observing how markets merchandise overnight, evaluating the demeanor of correlated property classes prior to the open, together with past times assimilating economical data, news, together with earnings releases (and marketplace responses to these), the trader gains a experience for the marketplace 24-hour interval earlier the opening bell rings.

Key to the trader’s reasoning is an elaboration of “what-if”scenarios that review hypotheses regarding probable marketplace action. What if nosotros opened upward alongside depression volume, nearly the previous day’s pin bird on a 24-hour interval alongside no scheduled economical releases? What if nosotros opened upward weak inward the S&P 500 Index, but meet firmness amid the small-scale cap stocks together with a mixed opened upward amid the major stock sectors? What if the marketplace breaks higher upward a cardinal toll level, alongside bullish demeanor inward bonds, the dollar, commodities, together with the to a greater extent than speculative stock sectors? What if the marketplace breaks below support, but breadth remains mixed?

Each of these scenarios calls for a specific trader response. Each offers potential trading opportunity. By mentally reviewing the scenarios inward advance, the trader becomes to a greater extent than prepared to deed upon them. The trader besides becomes to a greater extent than sensitive to their unfolding, thence that trading opportunities tin move properly anticipated together with mapped out.

Two sources of hypotheses for the 24-hour interval ahead tin move peculiarly useful to preparation. First, past times tracking indicators such every bit stocks making novel highs together with lows; momentum measures such every bit Demand/Supply; together with the percent of stocks trading higher upward their moving averages, nosotros tin gauge whether a marketplace is gaining or losing momentum to the upside or downside (or whether it is trading inward a hit alongside niggling momentum). Drawing on the regulation that strong momentum moves inward ane stream volition tend to send over into subsequent intervals (and weak momentum moves volition tend to reverse), nosotros tin formulate ideas every bit to whether markets are probable to hitting item targets today every bit a constituent of yesterday’s trade.

Second, historical marketplace patterns—queries every bit to how markets convey traded inward the past times nether the acquaint laid of conditions—can aid us formulate hypotheses for the coming day. For example, nosotros powerfulness detect that a depression momentum upward 24-hour interval yesterday which is besides a five-day closing high has a relatively misfortunate conduct a chance of closing higher today. That provides us alongside a hypothesis that enables us to anticipate weakness should nosotros move unable to concur a item upside toll level.

From this perspective, the successful trader is ane who formulates meaningful hypotheses prior to trading together with and thence processes unfolding activity apace together with accurately to create upward one's take away heed whether or non those hypotheses are finding support. Not all traders merchandise this way; nor should they. What I am describing is a framework that I convey cultivated over years of trading together with working alongside traders that makes move of my cognitive strengths inward synthesizing information into meaningful patterns together with themes.

Your challenge is to larn what you lot tin from my means of viewing markets, but non to mimic what I do. Good things come about when discovery where your cognitive strengths prevarication together with adjust the styles of others to create your ain niche.

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Info!! Gaining Perspective On Markets Yesteryear Shifting Perspective

Almost past times definition, if you're pursuing your own, unique path--in life too inwards markets--you are going to human face upward uncertainty.  If nosotros alive life only past times next tradition too consensus, we'll honor the safety of the known, but volition never cause got the peril of finding our ain path past times tackling the unknown.

As the recent post outlined, successful trading is all almost standing apart from consensus too finding unique perspectives too edges inwards fiscal markets.  But if y'all pursue uniqueness, you'll pursue uncertainty--and that requires a tolerance of what is uncomfortable too unfamiliar.

Two ways of gaining perspective on markets are microanalysis too macroanalysis.  In microanalysis, nosotros suspension a marketplace downward into smaller pieces too hold back for clues to time to come activity based upon the patterning of those pieces.  So, for instance, I powerfulness hold back at the alignment of sector direct inside the SPX to make clues every bit to what is strong, what is weak, too what the patterns of forcefulness too weakness powerfulness hateful for the economic scheme too stocks overall.  H5N1 dissimilar shape of microanalysis would endure to suspension the cost activity of a stock or index into intraday pieces, every bit inwards the representative of tracking book flows or upticks/downticks over curt intervals.  Many times, beneath the surface, nosotros tin run across show of accumulation or distribution that gives us a clue every bit to forrad marketplace behavior.

Macroanalysis, on the other hand, places marketplace activity inwards a broader context too looks for patterns amidst larger variables.  We could aggregate global economical data, for example, too infer patterns of growing global increase too weakness that could acquit upon the direct of stocks.  Similarly, nosotros could hold back across the policies of the world key banks too assess whether monetary weather condition are skewed toward liquidity or tightness.  In macroanalysis, nosotros powerfulness persuasion SPX every bit a sector itself inside the broader universe of global equities.  For example, since 2015, the correlation betwixt daily moves inwards shares inwards Europe, the Far East, Australia, too Asia (EFA) has been almost +.84 amongst the daily moves inwards the USA (SPY).  The correlation betwixt daily moves inwards emerging markets (EEM) too the USA (SPY) has been almost +.80.  Quite simply, markets are global too what happens inwards i piece of occupation of the the world is tremendously relevant for other parts.

If y'all honor markets are unclear and/or y'all honor yourself trapped on a consensus path, really oftentimes the answer is to accept a fresh hold back through a microscope or a telescope.  Looking beneath the surface of marketplace activity past times zooming inwards on short-term patterns tin convey clarity.  Stepping dorsum from solar daytime to solar daytime activity too focusing on the large film tin likewise convey fresh understanding.  To make perspective, nosotros cause got to shift perspective.  Microanalysis too macroanalysis are 2 ways of accomplishing that.  It is hard to remain stuck inwards a perceptual high temperature if nosotros cause got many microscopes too telescopes available to us.

Further Reading:  Market Profile every bit a Fresh Perspective on Trading
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Info!! Trading Notes For The Calendar Week Of April 4, 2016

Friday, Apr 8th

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

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

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

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


Thursday, Apr 7th

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

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

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

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

Wednesday, Apr 6th

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

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

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

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



Tuesday, Apr 5th

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

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

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

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


Monday, Apr 4th

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

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

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

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

Info!! Sector Update For April 12Th

Last week's sector update concluded that the viii major sectors of the S&P 500 that I runway had moved solidly into an uptrend mode, amongst defensive sectors lagging too signs of conduct chances appetite on the rise. With Friday's enterprise rally, nosotros saw upside breakouts across many sectors, continuing the marketplace uptrend. Here's how Technical Strength (a quantification of short-term trending) looks for the viii sectors every bit of Friday's close:

MATERIALS: +400
INDUSTRIAL: +340
CONSUMER DISCRETIONARY: +400
CONSUMER STAPLES: +140
ENERGY: +120
HEALTH CARE: -120
FINANCIAL: +460
TECHNOLOGY: +400

Recall that Technical Strength varies from +500 (extreme short-term uptrending) to -500 (extreme short-term downtrending), amongst values betwixt +100 too -100 suggesting no pregnant trending. We tin come across that the Financial sector has been extremely strong, amongst notable weakness amid the defensive Health Care too Consumer Staples issues. Raw Materials are showing strength, every bit is Technology too Consumer Discretionary shares, suggesting that investors are betting on increment too economical recovery.

As long every bit pro-risk themes are dominating too the bulk of sectors are displaying Technical Strength, it is premature to fade this rally for anything to a greater extent than than a short-term trade. As always, I volition last tracking the trending behaviour of the 40-stock handbasket of stocks inwards my pre-market Twitter posts (free subscription). I'll besides last updating marketplace themes inwards my Twitter posts, virtually peculiarly the themes of growth/recovery vs. weakness/recession.
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Info!! A Unique Mode Of Tracking Marketplace Pull As Well As Weakness

Above nosotros run into a cumulative running full of the number of NYSE stocks closing inwards a higher house their upper Bollinger Bands minus the number closing below their lower bands.  (Data from the Stock Charts site).  This is an interesting measure, because it tells us how many issues are distinctively rigid versus weak.  The gradient of the cumulative business is every bit of import every bit the direction, every bit it gives us a feel for the breadth of marketplace forcefulness or weakness.  Note the anemic bounce inwards the cumulative business since the election lows.  This reflects the real mixed breadth of the marketplace rise--some sectors quite strong, others distinctively weak.  Still, the business has been consistently rising, reflecting relatively niggling weakness with stocks.  For example, the by 2 days we've seen 95 too 103 stocks closed inwards a higher house their respective bands, but solely five too nine stocks closed below their lower bands.  In general, to larn out a sustained marketplace decline, nosotros involve to run into non simply a reduction inwards marketplace strength, but an expansion of weakness.  

The absence of weakness real oft is a useful predictor of hereafter marketplace strength.  For example, when the number of stocks below their Bollinger Bands has been inwards its lowest quartile since 2004 (little weakness), the adjacent xx days inwards SPY average a hit of +.95%.  When the number of stocks below their bands has been inwards their highest quartile (great weakness), the adjacent xx days bring averaged a hit of +.70%.  All other occasions bring averaged a 20-day hit of solely +.21%.  It's a prissy event of how too thence much inwards the agency of marketplace returns comes from the relative extremes of momentum too value.

Further Reading:  Momentum, Value, too Short-Term Market Movement
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