The most recent post for the Introduction to Trading ebook introduced the catch of the auction marketplace equally a framework for agreement the stock market, using the uncomplicated illustration of an eBay auction. Now let's expand the conceptual framework to catch how auction markets tin choose together participants who operate at differing fourth dimension frames.
Central to whatever auction procedure is the notion of value. Value is the price--or arrive at of prices--that choose together buyers in addition to sellers. Because the auction exists to facilitate trade, the auction procedure constantly hunts for value: that cost grade that volition enable buyers in addition to sellers to transact with i another.
It is of import to recognize that value has both an objective in addition to a subjective meaning. An objective Definition of value inward the Market Profile framework is that arrive at of prices during a twenty-four hours or calendar week that covert to a greater extent than or less 2/3 of the bulk for that period. This value arrive at represents the prices that brought together the bulk of buyers in addition to sellers; it is objectively measurable equally a share of time, price, in addition to volume.
Value too has a subjective important to auction participants, equally each has his or her ain ideas of what a marketplace is worth. Influenza A virus subtype H5N1 value investor may define value good below the market's electrical flow level, because that is what stocks are worth according to his or her metrics. Influenza A virus subtype H5N1 short-term trader may perceive value inward an uptrend when a marketplace pulls dorsum to a 20-day moving average line. Influenza A virus subtype H5N1 longer-term trader mightiness give away value when at that topographic point is a important expansion of the release of stocks making fresh 52-week lows.
Trading occurs at the intersection of a trader's subjective Definition of value in addition to the market's objectively determined placement of value. If I recall "true" value is good higher upwardly or below the market's electrical flow assessment of value, I own got an incentive to instruct inward an fellowship to own got payoff of this discrepancy. My merchandise reflects my supposition that the market's assessed value will, over time, movement toward my value assessment. If I house value where the marketplace is currently trading, I may own got no incentive to instruct inward the market. By my subjective criteria, the marketplace is fairly priced, in addition to I volition hold off for the marketplace to movement below my value grade to brand buying profitable.
Imagine an auction with participants at many dissimilar fourth dimension frames, each with real dissimilar subjective definitions of value. An automobile auction, for example, mightiness characteristic active participation with people who own got used cars to sell in addition to others who wishing to instruct used vehicles. Bidders in addition to sellers own got an catch of what constitutes fair wholesale in addition to retail prices in addition to essay to obtain prices equally closed to those extremes equally possible.
Suppose, however, that--lurking inward the background of the wholesale machine auction--is a grouping of dealerships that brand their living past times buying inexpensive used cars, fixing them up, in addition to and hence selling at closed to retail prices. They volition entirely bid on cars when an oversupply province of affairs pushes prices to or fifty-fifty below traditional wholesale levels; this enables them to brand a prissy profit, fifty-fifty afterward they position operate into the vehicles. This way that a whole novel root of demand--and volume--will instruct inward the auction marketplace when prices striking levels that works life subjective value for large, longer-time frame participants.
Above in addition to below the market, yous ever own got value-oriented institutions (such equally usual funds) ready to instruct stocks when they're inexpensive (by the institutions' criteria) in addition to sell them when they're priced higher upwardly (the institution's Definition of) value. No incertitude you've seen markets that own got traded inward a narrow arrive at on placidity volume, entirely to movement higher on increased bulk next a arrive at breakout, in addition to and hence contrary sharply on fifty-fifty stronger volume. During the narrow arrive at bound action, marketplace makers were dominating the action; technical traders (including short-term prop traders) jumped into the marketplace on the breakout; in addition to value-oriented traders (including hedge funds) sold into the forcefulness equally stock index futures went to abrupt premium to cash. This is a uncomplicated event of how auctions choose together participants across dissimilar fourth dimension frames.
When I showtime began operate at a prop firm, I was surprised to detect that the traders focused on something quite dissimilar from the average traders I had run into. They used cost in addition to bulk information (including information from the fellowship book) to position *who* was inward the market. They wanted to know if at that topographic point was higher upwardly or below average institutional participation; if moves to novel cost highs or lows were attracting momentum participants; etc. By using "technical" marketplace information to brand inferences almost underlying auction processes, they were able to brand reasoned judgments equally to whether marketplace moves were probable to proceed or reverse.
In the side past times side segment of the book, we'll own got a closer expect at how savvy traders educate trading ideas from auction-generated marketplace data.
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Showing posts sorted by relevance for query volume-in-stock-index-futures-market. Sort by date Show all posts
Thursday, March 5, 2020
Monday, January 14, 2019
Info!! Trading Notes: Calendar Week Of November 23Rd
Friday, Nov 27th
* Not much changed from yesterday alongside honour to U.S. stocks, equally nosotros boot the bucket on to concord of import back upwards inwards the lower 2080s inwards the front end calendar month ES contract. I boot the bucket on to move inwards the style of buying weakness that holds higher upwards overnight lows, but await merchandise to move deadening today given the long vacation weekend that many U.S. traders volition move taking.
* So far, the number of stocks displaying odd forcefulness inwards the recent motion higher has been modest. Below is a nautical chart of the number of NYSE issues closing higher upwards their upper Bollinger Bands minus the number closing below their lower bands. (Data from the splendid stockcharts.com site). To this point, that stair out of forcefulness has been waning.
* Another resources that I stimulate got constitute quite useful is the Stock Spotter site. They furnish purchase in addition to sell signals for private stocks based upon their bicycle models. They also stimulate got toll forecasts for each stock in addition to ETF. I've constitute those forecasts for SPY to stimulate got value in addition to stimulate got backtested them for the improve operate of ii years. At present, their forecast is bullish for stocks over a adjacent two-week horizon.
Thursday, Nov 26th
* Happy Thanksgiving in addition to many cheers to readers! I aspect frontward to a dandy 2016. This latest article describes a structured procedure for dealing positively alongside setbacks in addition to failure. So much of the departure betwixt the successful trader in addition to the unsuccessful 1 is how they bargain alongside the inevitable losses dealt past times markets (and past times our faulty processing of market-generated information).
* We've continued modestly higher inwards overnight trade, equally the basic strategy of buying weakness that holds higher upwards key prior twenty-four hr catamenia in addition to overnight levels has been a practiced one. The relative outperformance of little caps is something I'm watching. Utility stocks, faced alongside the prospect of rise rates inwards the U.S., stimulate got been relatively weak. Below, the graphic from the splendid FinViz site shows mixed surgical procedure amidst U.S. sectors. It continues to move a rotational environment.
* On a to a greater extent than global scale, I'm watching the relative surgical procedure of China, emerging markets, Japan, in addition to European stocks, given the prospect of farther easing from overseas cardinal banks in addition to a charge per unit of measurement hike from the Fed. Note the relative forcefulness of the U.S. dollar of late; that is also a theme that is impacting U.S. shares. I know besides many traders who are in addition to so busy looking for short-term setups that they completely immature lady larger themes that are driving stocks on the longer fourth dimension frame.
Wednesday, Nov 25th
* We tested the overnight lows inwards early on merchandise yesterday in addition to constitute rigid buying off the lows, bringing us dorsum toward the upper halt of the recent range. The inability to sustain weakness is consistent alongside a marketplace seat inwards a rise cycle, though I do detect tepid breadth therefore far inwards the motion higher. For example, the past times duo of days, we've seen to a greater extent than stocks register fresh 52-week lows than highs. While I do recollect nosotros stimulate got a practiced chance to attempt out recent highs, I am far from convinced that we're launching to a fresh bull leg from here.
* Dec promises to move an eventful month, alongside ECB in addition to Fed meetings that could Pb to monetary easing in addition to an involvement charge per unit of measurement hike, respectively. I recollect it's possible that, alongside a dovish Fed hike in addition to monetary ease inwards Nippon in addition to Europe, nosotros could reckon a renewed "QE" merchandise inwards stocks.
* The nautical chart of cumulative upticks vs. downticks amidst all listed stocks (red delineate of piece of job below) has been heading to novel highs. That reflects relative forcefulness late amidst smaller cap issues. Interestingly, the cumulative upticks vs. downticks for Dow stocks exclusively is inwards a recent downtrend. This rotational merchandise could good boot the bucket on through this vacation period.
Tuesday, Nov 24th
* Yesterday's merchandise was interesting inwards that nosotros saw considerable buying involvement inwards early on trade, equally tracked past times NYSE TICK, but much of the forcefulness centered on smaller cap issues in addition to non the NASDAQ in addition to SPX large caps. What turns a bull, rise stage of a marketplace seat bicycle into a topping stage is that buying involvement fails to accept prices meaningfully higher, equally around segments of the marketplace seat display weakness equally others concord up. In yesterday's trade, it was the NASDAQ index--and AAPL specifically--displaying weakness. As buying failed to force indexes higher, sellers came inwards during the afternoon in addition to took us lower. Yesterday's merchandise was a squeamish illustration of how markets plough on a brusque fourth dimension frame. It was also a squeamish illustration of how it's of import to rail multiple marketplace seat sectors, non simply the index you're trading.
* Painful sense has taught me to non move long stocks alongside pure volatility (volatility per unit of measurement of trading volume) is low. Forward returns simply aren't positive on average. As you lot tin reckon below, pure vol had gotten quite depression recently, a xanthous caution light. With the downing of the Russian jet overnight inwards Turkey, stocks stimulate got fallen dorsum in addition to taken out stops inwards the 2070s inwards the ES futures. Pure vol has expanded meaningfully. Adjusting volatility expectations in addition to risk/reward is key here. On 1 hand, corrections that get upwards pure vol offering practiced entry points on the long side. On the other hand, nosotros at nowadays stimulate got a province of affairs where idiosyncratic (geopolitical) factors are moving markets. It is hard to successfully merchandise historical patterns when idiosyncratic conduct chances factors dominate. I'm opened upwards to buying weakness that cannot accept out the overnight lows, but inwards no rush to larn involved.
Monday, Nov 23rd
* How much fourth dimension do nosotros waste product in addition to how much mental clutter do nosotros do past times staring at screens, opening superfluous email, in addition to reading cloth irrelevant to our conclusion making? How does that clutter clog creative processes in addition to interfere alongside generating novel in addition to improve ideas in addition to trades? This post on media consumption tackles a really of import topic: nosotros can't get together practiced ideas if we're non collecting the right puzzle pieces.
* We're trading inwards a relatively sideways gain inwards the ES futures, correcting to a greater extent than inwards fourth dimension than inwards price. That is mostly what markets do when they're trading inwards a practiced uptrend, in addition to that's how I'm treating this marketplace seat until proven otherwise. The exclusively flies inwards the ointment are depression levels of implied correlation in addition to pure volatility, both of which are associated alongside subnormal near-term returns. My basic strategy, equally has been the instance recently, is to purchase weakness that holds higher upwards overnight in addition to prior day's lows.
* I mostly similar to purchase oversold levels inwards rise markets in addition to sell overbought levels inwards falling ones. Influenza A virus subtype H5N1 large portion of profitability comes from practiced entry execution. The same applies to move out execution. When positions become our agency but are stretched to the upside or downside, it mostly pays to accept at to the lowest degree around of our seat off inwards markets that display short-term hateful reversion. I aspect at a medium term charge per unit of measurement of alter stair out on bars created every 500 toll changes to furnish perspective on overbought in addition to oversold. It's non something I merchandise off of directly, but utilisation to mostly guide practiced in addition to bad merchandise location.
* Not much changed from yesterday alongside honour to U.S. stocks, equally nosotros boot the bucket on to concord of import back upwards inwards the lower 2080s inwards the front end calendar month ES contract. I boot the bucket on to move inwards the style of buying weakness that holds higher upwards overnight lows, but await merchandise to move deadening today given the long vacation weekend that many U.S. traders volition move taking.
* So far, the number of stocks displaying odd forcefulness inwards the recent motion higher has been modest. Below is a nautical chart of the number of NYSE issues closing higher upwards their upper Bollinger Bands minus the number closing below their lower bands. (Data from the splendid stockcharts.com site). To this point, that stair out of forcefulness has been waning.
Thursday, Nov 26th
* Happy Thanksgiving in addition to many cheers to readers! I aspect frontward to a dandy 2016. This latest article describes a structured procedure for dealing positively alongside setbacks in addition to failure. So much of the departure betwixt the successful trader in addition to the unsuccessful 1 is how they bargain alongside the inevitable losses dealt past times markets (and past times our faulty processing of market-generated information).
* We've continued modestly higher inwards overnight trade, equally the basic strategy of buying weakness that holds higher upwards key prior twenty-four hr catamenia in addition to overnight levels has been a practiced one. The relative outperformance of little caps is something I'm watching. Utility stocks, faced alongside the prospect of rise rates inwards the U.S., stimulate got been relatively weak. Below, the graphic from the splendid FinViz site shows mixed surgical procedure amidst U.S. sectors. It continues to move a rotational environment.
Wednesday, Nov 25th
* We tested the overnight lows inwards early on merchandise yesterday in addition to constitute rigid buying off the lows, bringing us dorsum toward the upper halt of the recent range. The inability to sustain weakness is consistent alongside a marketplace seat inwards a rise cycle, though I do detect tepid breadth therefore far inwards the motion higher. For example, the past times duo of days, we've seen to a greater extent than stocks register fresh 52-week lows than highs. While I do recollect nosotros stimulate got a practiced chance to attempt out recent highs, I am far from convinced that we're launching to a fresh bull leg from here.
* Dec promises to move an eventful month, alongside ECB in addition to Fed meetings that could Pb to monetary easing in addition to an involvement charge per unit of measurement hike, respectively. I recollect it's possible that, alongside a dovish Fed hike in addition to monetary ease inwards Nippon in addition to Europe, nosotros could reckon a renewed "QE" merchandise inwards stocks.
* The nautical chart of cumulative upticks vs. downticks amidst all listed stocks (red delineate of piece of job below) has been heading to novel highs. That reflects relative forcefulness late amidst smaller cap issues. Interestingly, the cumulative upticks vs. downticks for Dow stocks exclusively is inwards a recent downtrend. This rotational merchandise could good boot the bucket on through this vacation period.
Tuesday, Nov 24th
* Yesterday's merchandise was interesting inwards that nosotros saw considerable buying involvement inwards early on trade, equally tracked past times NYSE TICK, but much of the forcefulness centered on smaller cap issues in addition to non the NASDAQ in addition to SPX large caps. What turns a bull, rise stage of a marketplace seat bicycle into a topping stage is that buying involvement fails to accept prices meaningfully higher, equally around segments of the marketplace seat display weakness equally others concord up. In yesterday's trade, it was the NASDAQ index--and AAPL specifically--displaying weakness. As buying failed to force indexes higher, sellers came inwards during the afternoon in addition to took us lower. Yesterday's merchandise was a squeamish illustration of how markets plough on a brusque fourth dimension frame. It was also a squeamish illustration of how it's of import to rail multiple marketplace seat sectors, non simply the index you're trading.
* Painful sense has taught me to non move long stocks alongside pure volatility (volatility per unit of measurement of trading volume) is low. Forward returns simply aren't positive on average. As you lot tin reckon below, pure vol had gotten quite depression recently, a xanthous caution light. With the downing of the Russian jet overnight inwards Turkey, stocks stimulate got fallen dorsum in addition to taken out stops inwards the 2070s inwards the ES futures. Pure vol has expanded meaningfully. Adjusting volatility expectations in addition to risk/reward is key here. On 1 hand, corrections that get upwards pure vol offering practiced entry points on the long side. On the other hand, nosotros at nowadays stimulate got a province of affairs where idiosyncratic (geopolitical) factors are moving markets. It is hard to successfully merchandise historical patterns when idiosyncratic conduct chances factors dominate. I'm opened upwards to buying weakness that cannot accept out the overnight lows, but inwards no rush to larn involved.
Monday, Nov 23rd
* How much fourth dimension do nosotros waste product in addition to how much mental clutter do nosotros do past times staring at screens, opening superfluous email, in addition to reading cloth irrelevant to our conclusion making? How does that clutter clog creative processes in addition to interfere alongside generating novel in addition to improve ideas in addition to trades? This post on media consumption tackles a really of import topic: nosotros can't get together practiced ideas if we're non collecting the right puzzle pieces.
* We're trading inwards a relatively sideways gain inwards the ES futures, correcting to a greater extent than inwards fourth dimension than inwards price. That is mostly what markets do when they're trading inwards a practiced uptrend, in addition to that's how I'm treating this marketplace seat until proven otherwise. The exclusively flies inwards the ointment are depression levels of implied correlation in addition to pure volatility, both of which are associated alongside subnormal near-term returns. My basic strategy, equally has been the instance recently, is to purchase weakness that holds higher upwards overnight in addition to prior day's lows.
* I mostly similar to purchase oversold levels inwards rise markets in addition to sell overbought levels inwards falling ones. Influenza A virus subtype H5N1 large portion of profitability comes from practiced entry execution. The same applies to move out execution. When positions become our agency but are stretched to the upside or downside, it mostly pays to accept at to the lowest degree around of our seat off inwards markets that display short-term hateful reversion. I aspect at a medium term charge per unit of measurement of alter stair out on bars created every 500 toll changes to furnish perspective on overbought in addition to oversold. It's non something I merchandise off of directly, but utilisation to mostly guide practiced in addition to bad merchandise location.
Thursday, April 30, 2015
Info!! Updated Relative Book Norms For The Es Market
As promised, I'm updating readers on the relative book norms for the S&P 500 e-mini (ES) market. Remember, these stand upward for the median volumes for each one-half hr menses during the marketplace position day. I volition live posting to a greater extent than on the topic of relative book inwards coming days. For to a greater extent than data almost relative volume, banking corporation tally out the recent postal service on the topic likewise equally this explanation.
The numbers inwards parentheses are the criterion deviations some those median book values. That gives you lot an take in of what a really high or depression book figure would hold off like: I mostly visit values inwards a higher house or below 1 criterion divergence to live meaningful.
Note that all times are Central Time, U.S.; the lastly menses is the fifteen infinitesimal "after hours" menses inwards Globex futures. The values instruct dorsum to mid-June (45 trading days), which is when the electrical flow contract became the front end month.
The numbers dramatically highlight when institutions tend to live most active inwards the stock index futures market. Knowing when large participants are active is of import inwards handicapping the odds of markets moving significantly, equally book correlates alongside volatility past times almost .65. More on this topic to come upward shortly.
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The numbers inwards parentheses are the criterion deviations some those median book values. That gives you lot an take in of what a really high or depression book figure would hold off like: I mostly visit values inwards a higher house or below 1 criterion divergence to live meaningful.
Note that all times are Central Time, U.S.; the lastly menses is the fifteen infinitesimal "after hours" menses inwards Globex futures. The values instruct dorsum to mid-June (45 trading days), which is when the electrical flow contract became the front end month.
8:30 AM - 232,738 (45,819)
9:00 AM - 206,277 (48,136)
9:30 AM - 133,732 (37,981)
10:00 AM - 105,369 (36,975)
10:30 AM - 95,450 (40,804)
11:00 AM - 61,769 (25,008)
11:30 AM - 56,682 (21,972)
12:00 north - 67,068 (30,186)
12:30 PM - 61,687 (23,390)
13:00 PM - 82,336 (32,547)
13:30 PM - 76,717 (44,062)
14:00 PM - 99,610 (35,349)
14:30 PM - 194,488 (56,432)
15:00 PM - 95,539 (25,427)
9:00 AM - 206,277 (48,136)
9:30 AM - 133,732 (37,981)
10:00 AM - 105,369 (36,975)
10:30 AM - 95,450 (40,804)
11:00 AM - 61,769 (25,008)
11:30 AM - 56,682 (21,972)
12:00 north - 67,068 (30,186)
12:30 PM - 61,687 (23,390)
13:00 PM - 82,336 (32,547)
13:30 PM - 76,717 (44,062)
14:00 PM - 99,610 (35,349)
14:30 PM - 194,488 (56,432)
15:00 PM - 95,539 (25,427)
The numbers dramatically highlight when institutions tend to live most active inwards the stock index futures market. Knowing when large participants are active is of import inwards handicapping the odds of markets moving significantly, equally book correlates alongside volatility past times almost .65. More on this topic to come upward shortly.
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Friday, June 26, 2020
Info!! Book Inwards The Stock Index Futures Marketplace - Role One
My recent post offered a uncomplicated tool for active traders who were having difficulty getting a grip on the grapheme of the evolving trading day. This two-part serial volition outline a dissimilar fix of tools for the same purpose, based on marketplace volume. The marrow sentiment is that how the marketplace volition merchandise is a role of who is participating inwards the marketplace. If large, institutional traders are active, nosotros volition tend to run into greater toll volatility as well as larger marketplace moves per unit of measurement of time. If those institutional traders are non active, the marketplace is to a greater extent than probable to last quiet, amongst depression volatility as well as smaller moves per fourth dimension unit.
Those large traders are trading directionally, many times keying off primal dynamics (news, earnings reports, economical reports) as well as intermarket dynamics (shifts inwards involvement rates, currencies, commodities). It's when these related markets are moving actively that we're to a greater extent than probable to revaluations of stocks, as well as thence greater institutional participation (volume). When tidings is relatively absent as well as those related markets are non undergoing shifts inwards their value areas (to exercise a Market Profile term), it is less probable that stocks volition last revalued. That keeps book inwards shares depression as well as toll activeness quiet.
A large portion of agreement the grapheme of the marketplace day, then, is seeing what is happening inwards those related markets as well as seeing how stocks are trading relative to expectations regarding economical news, earnings reports, as well as the like.
Another means of capturing the grapheme of the marketplace hateful solar daytime is to straight mensurate book as well as compare it to the median book for that item fourth dimension menses over a lookback period. My inquiry has constitute that, when this relative book is elevated (i.e., when we're trading higher book than normal inwards a item fourth dimension frame), the added book virtually solely comes from transactions of l contracts or larger inwards the S&P e-mini futures (ES contract). Clearly, those trades are non coming from small-scale retail traders. Rather, it is the professional person trader who is to a greater extent than active inwards the marketplace when book is elevated. The increased book is the footprint that tells yous *who* is inwards the marketplace at the time.
For purposes of illustration, I went dorsum to March 13th (when the June ES contract became active) as well as broke downwards each trading hateful solar daytime into ix 45-minute segments. The correlation betwixt the book of the 45-minute menses as well as the high-low toll arrive at for that menses was a considerable .83. To plough over but 1 example, when the book of the 45-minute menses was to a higher house 170,000 contracts (N = 105), the toll arrive at for the menses averaged .78%. When the book was below that grade (N = 102), the toll ranged averaged merely .42%. On average, toll drive was nearly twice every bit high during busy periods every bit during tedious ones.
Interestingly, fourteen of the twenty highest book periods occurred during the commencement or final 45-minute trading segment of the day. Conversely, 17 of the twenty lowest book periods occurred during the midday periods from 11:45 AM ET to 2 PM ET. That tells us that *who* is inwards the marketplace changes significantly over the shape of the marketplace day. An active trader needs to conduct hold dissimilar anticipations of toll drive early on as well as piece of cake inwards the hateful solar daytime compared amongst midday.
Finally, on a daily footing over the March 13th-present period, daily toll arrive at correlates a whopping .86% amongst daily ES contract volume. When the ES book has been over 1,800,000 contracts (N = 12), the daily toll arrive at has averaged 3.16%. When the book has been below that grade (N = 11), the daily toll arrive at has averaged merely 1.43%.
Clearly this has of import implications for how traders contend trades. In a busier, to a greater extent than volatile market, it makes feel to house stops wider as well as to permit profits run farther (i.e., to house earnings targets farther from practiced entry points). In tedious markets, it makes feel to overstep along stops tight as well as conduct hold profits aggressively, every bit these are less probable to run.
Who is inwards the marketplace dictates how yous should merchandise that market. That varies from 1 hateful solar daytime to the next, as well as it varies from 1 fourth dimension of hateful solar daytime to another. I cannot intend of a to a greater extent than of import lesson for developing active traders.
RELATED POST:
Intraday Volume Patterns as well as Volatility
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Those large traders are trading directionally, many times keying off primal dynamics (news, earnings reports, economical reports) as well as intermarket dynamics (shifts inwards involvement rates, currencies, commodities). It's when these related markets are moving actively that we're to a greater extent than probable to revaluations of stocks, as well as thence greater institutional participation (volume). When tidings is relatively absent as well as those related markets are non undergoing shifts inwards their value areas (to exercise a Market Profile term), it is less probable that stocks volition last revalued. That keeps book inwards shares depression as well as toll activeness quiet.
A large portion of agreement the grapheme of the marketplace day, then, is seeing what is happening inwards those related markets as well as seeing how stocks are trading relative to expectations regarding economical news, earnings reports, as well as the like.
Another means of capturing the grapheme of the marketplace hateful solar daytime is to straight mensurate book as well as compare it to the median book for that item fourth dimension menses over a lookback period. My inquiry has constitute that, when this relative book is elevated (i.e., when we're trading higher book than normal inwards a item fourth dimension frame), the added book virtually solely comes from transactions of l contracts or larger inwards the S&P e-mini futures (ES contract). Clearly, those trades are non coming from small-scale retail traders. Rather, it is the professional person trader who is to a greater extent than active inwards the marketplace when book is elevated. The increased book is the footprint that tells yous *who* is inwards the marketplace at the time.
For purposes of illustration, I went dorsum to March 13th (when the June ES contract became active) as well as broke downwards each trading hateful solar daytime into ix 45-minute segments. The correlation betwixt the book of the 45-minute menses as well as the high-low toll arrive at for that menses was a considerable .83. To plough over but 1 example, when the book of the 45-minute menses was to a higher house 170,000 contracts (N = 105), the toll arrive at for the menses averaged .78%. When the book was below that grade (N = 102), the toll ranged averaged merely .42%. On average, toll drive was nearly twice every bit high during busy periods every bit during tedious ones.
Interestingly, fourteen of the twenty highest book periods occurred during the commencement or final 45-minute trading segment of the day. Conversely, 17 of the twenty lowest book periods occurred during the midday periods from 11:45 AM ET to 2 PM ET. That tells us that *who* is inwards the marketplace changes significantly over the shape of the marketplace day. An active trader needs to conduct hold dissimilar anticipations of toll drive early on as well as piece of cake inwards the hateful solar daytime compared amongst midday.
Finally, on a daily footing over the March 13th-present period, daily toll arrive at correlates a whopping .86% amongst daily ES contract volume. When the ES book has been over 1,800,000 contracts (N = 12), the daily toll arrive at has averaged 3.16%. When the book has been below that grade (N = 11), the daily toll arrive at has averaged merely 1.43%.
Clearly this has of import implications for how traders contend trades. In a busier, to a greater extent than volatile market, it makes feel to house stops wider as well as to permit profits run farther (i.e., to house earnings targets farther from practiced entry points). In tedious markets, it makes feel to overstep along stops tight as well as conduct hold profits aggressively, every bit these are less probable to run.
Who is inwards the marketplace dictates how yous should merchandise that market. That varies from 1 hateful solar daytime to the next, as well as it varies from 1 fourth dimension of hateful solar daytime to another. I cannot intend of a to a greater extent than of import lesson for developing active traders.
RELATED POST:
Intraday Volume Patterns as well as Volatility
.
Tuesday, January 15, 2019
Info!! Trading Notes: Calendar Week Of 8/10/2015
Friday, August 14th
* For me, the standout observation for today's merchandise is that the yuan stabilized at the overnight fix, nosotros got a little popular inwards stocks, in addition to thus at that spot has been no follow through and, equally I write, that little popular has been alone reversed. Meanwhile petroleum in addition to copper buy the farm on to languish close their recent lows. The quest for devaluation inwards Communist People's Republic of China is a answer to economical weakness in addition to perchance the best real-time approximate of that weakness is inwards commodities pricing. I create got problem seeing whatever sustained bull displace inwards stocks until the deflationary pressures reflected past times commodities weakness abate.
*
* The breadth volatility mensurate referenced yesterday is at the lowest levels seen since piece of cake February/early March. Such depression levels create got been associated alongside weak returns over a adjacent five-day basis. Pure volatility has likewise moved below median levels, likewise associated alongside weak forrad returns over a swing basis.
Thursday, August 13th
* Yesterday's banker's complaint nearly caution chasing oversold levels when pure volatility is high turned out to last to a greater extent than right than I expected, equally nosotros reversed the recent weakness in addition to rallied strongly inwards SPX. We dropped all the way below 2050 inwards the ES futures early on inwards the day, a two-week low. Interestingly, nosotros only saw 1058 stocks across all exchanges brand fresh monthly lows vs. 1078 on 8/6 in addition to 1862 on 7/27. Note a set out of sectors that held upwards alongside relative strength, including the yield-sensitive utilities in addition to consumer staples shares. The commodity-related stocks create got likewise held up. This told us that the early on driblet was to a greater extent than nearly sector rotation than full-on risk-off--a valuable tell. Market breadth has non been weakening alongside the recent Communist People's Republic of China related selloff.
* Pure volatility remains unusually elevated fifty-fifty alongside yesterday's rebound; when this occurs, at that spot is unremarkably to a greater extent than upside left inwards the move, equally the combination of volatility in addition to forcefulness leads to near-term momentum.
* The 3-5 hateful solar daytime models are mixed: i is neutral, the other mildly bearish. The adjacent hateful solar daytime model is neutral. These are the kinds of signals yous buy the farm far the middle of trading ranges. I could last persuaded to purchase intraday weakness that holds higher upwards the overnight lows for a short-term merchandise higher based on the potent pure volatility, but otherwise don't perceive a potent edge.
* My breadth volatility mensurate is hitting multi-week lows. That's a mensurate of the volatility of hateful solar daytime to hateful solar daytime breadth in addition to it's been a helpful measure. When breadth volatility has been inwards the lowest one-half of its distribution since 2014, the adjacent 5 days inwards SPY create got averaged a loss of -.01%. When inwards the highest one-half of its distribution, the adjacent 5 days inwards SPY create got averaged a gain of +.34%. If nosotros were to larn other volatility readings dropping, the models would probable plow bearish.
Wednesday, August 12th
* Communist People's Republic of China devaluation continues equally major driver of stocks globally. While developed marketplace seat equities create got traded inwards a arrive at over the past times several months, emerging marketplace seat stocks create got been inwards a consistent downtrend (see EEM nautical chart above). This suggests that a major engine of recent global economical increment is no longer a contributing factor. It is this weakness in addition to non the stimulus value of the weaker Asian currencies that is driving stock in addition to commodity markets lower in addition to stimulating a flying to the security of character yield.
* The 3-5 hateful solar daytime models for SPX are neutral; the adjacent hateful solar daytime model ended Tuesday real modestly bullish. The models cannot component inwards idiosyncratic marketplace seat factors such equally the devaluation, thus I am non relying upon them for signals at this time. Sometimes this fourth dimension actually is different.
* My mensurate of "pure volatility"--the average cost displace per unit of measurement of trading volume--has buy the farm elevated, which way that nosotros could encounter outsized moves (including countertrend ones) equally book picks up. This has of import implications for the setting of stops in addition to targets on trades in addition to makes it peculiarly unsafe to chase overbought or oversold cost levels.
* General game invention is to buy the farm on to sell bounces inwards SPX that terminate at lower highs. If the devaluation genuinely is contributing to an ongoing risk-off trade, nosotros should non merchandise higher upwards the levels seen merely prior to the most recent yuan fix. I buy the farm on to harbor doubts nearly whatever form of sustained Fed hiking inwards the human face upwards of what is increasingly looking similar a currency state of war of competitive devaluations.
Tuesday, August 11th
* Communist People's Republic of China devaluation primal slice of overnight news; USD rises vs. Asia; stocks hand dorsum a chunk of Monday's gains. Communist People's Republic of China devaluation affirms regime describe of piece of job organisation over economical weakness. Difficult to encounter much inwards the way of Fed hiking alongside Asian goods becoming cheaper inwards U.S. in addition to dampening inflation. Also hard to encounter Fed hiking inwards whatever sustained way inwards the human face upwards of what is increasingly looking similar a currency war. All inwards all, this is consistent alongside the macro themes of late outlined in addition to should last supportive of U.S. stocks offering yield. Economic benefits of lower inflation/lower prices are tempered past times headwinds from higher USD.
* My 3-5 hateful solar daytime models for SPX turned modestly bearish at cease of hateful solar daytime on Monday, but reaction to the Communist People's Republic of China intelligence swamps model effects. Next hateful solar daytime model for SPX turned from modestly bullish to neutral.
* General game invention is to sell bounces inwards SPX that neglect to create got out Mon highs. Commodity markets create got been a adept proxy for the Asia weakness theme, in addition to it is hard to encounter stocks sustaining a rally if that subject is dominant.
Friday, June 26, 2020
Info!! Book Inwards The Stock Index Futures Marketplace - Business Office Two
my recent post, I suggested that a fundamental to agreement the graphic symbol of a marketplace hateful solar daytime was tracking the book patterns inside that day. Specifically, if book is running significantly higher upwards normal, it agency that institutional participants are active inwards the marketplace. This tends to pick out greater toll volatility together with increased likelihood of breakout together with trending moves--especially when nosotros run into similar moves inwards related markets (interest rates, currencies, commodities, etc.).
The nautical chart higher upwards is quite informative. It goes dorsum 24 trading days (to the commencement hateful solar daytime when the June ES futures contract became the forepart month) together with identifies the median book together with high-low toll hit (in per centum change) for each 15-minute menstruum through the day. We tin clearly run into the grinning designing inwards the data: the style for early on forenoon together with belatedly afternoon periods to merchandise alongside greater book together with toll movements than periods midday. Indeed, toll campaign early on together with belatedly inwards the hateful solar daytime is easily 50-70% greater than midday. This suggests that uniform rules for placement of stops together with toll targets are jump to fail: the marketplace is non uniform intraday.
Nor is the marketplace uniform from hateful solar daytime to day. These are median values, simply the values for each private hateful solar daytime vary widely. Wednesday's merchandise was a peachy example: about 15-minute periods during the hateful solar daytime traded at near-median book together with fifty-fifty lower than median toll movement. Other periods were greatly expanded from the norms charted. Those were the periods contributing to the day's trending movement. Institutional traders are non necessarily active inwards every fourth dimension period--they're non daytraders. But when nosotros run into that they are active at fundamental junctures (during toll breakouts, inwards answer to movements inwards rates or currencies), it underscores the significance of moves that hap every bit a result.
Below are the information for the chart. Note that the fourth dimension periods are USA Eastern time; fifteen-minute segments starting at the fourth dimension noted. I run these information to say me when book is running higher upwards together with below average and, hence, when I tin facial expression to a greater extent than or less toll movement. As mentioned earlier, this is invaluable inwards deciding when to accept profits aggressively vs. (as Wednesday) allow profits run.
RELATED POSTS:
What Every Short-Term Trader Should Know
Finding Opportunity inwards the Stock Market
.
The nautical chart higher upwards is quite informative. It goes dorsum 24 trading days (to the commencement hateful solar daytime when the June ES futures contract became the forepart month) together with identifies the median book together with high-low toll hit (in per centum change) for each 15-minute menstruum through the day. We tin clearly run into the grinning designing inwards the data: the style for early on forenoon together with belatedly afternoon periods to merchandise alongside greater book together with toll movements than periods midday. Indeed, toll campaign early on together with belatedly inwards the hateful solar daytime is easily 50-70% greater than midday. This suggests that uniform rules for placement of stops together with toll targets are jump to fail: the marketplace is non uniform intraday.
Nor is the marketplace uniform from hateful solar daytime to day. These are median values, simply the values for each private hateful solar daytime vary widely. Wednesday's merchandise was a peachy example: about 15-minute periods during the hateful solar daytime traded at near-median book together with fifty-fifty lower than median toll movement. Other periods were greatly expanded from the norms charted. Those were the periods contributing to the day's trending movement. Institutional traders are non necessarily active inwards every fourth dimension period--they're non daytraders. But when nosotros run into that they are active at fundamental junctures (during toll breakouts, inwards answer to movements inwards rates or currencies), it underscores the significance of moves that hap every bit a result.
Below are the information for the chart. Note that the fourth dimension periods are USA Eastern time; fifteen-minute segments starting at the fourth dimension noted. I run these information to say me when book is running higher upwards together with below average and, hence, when I tin facial expression to a greater extent than or less toll movement. As mentioned earlier, this is invaluable inwards deciding when to accept profits aggressively vs. (as Wednesday) allow profits run.
| Time | Volume | Range |
| 9:30 | 107300 | 0.388 |
| 9:45 | 85008 | 0.342 |
| 10:00 | 91522 | 0.348 |
| 10:15 | 71411 | 0.314 |
| 10:30 | 81151 | 0.34 |
| 10:45 | 73599 | 0.315 |
| 11:00 | 60560 | 0.263 |
| 11:15 | 50261 | 0.296 |
| 11:30 | 53194 | 0.277 |
| 11:45 | 46481 | 0.242 |
| 12:00 | 35930 | 0.232 |
| 12:15 | 40276 | 0.235 |
| 12:30 | 39703 | 0.233 |
| 12:45 | 36437 | 0.24 |
| 13:00 | 38134 | 0.224 |
| 13:15 | 31076 | 0.193 |
| 13:30 | 39797 | 0.247 |
| 13:45 | 35313 | 0.19 |
| 14:00 | 47716 | 0.29 |
| 14:15 | 50910 | 0.248 |
| 14:30 | 50096 | 0.297 |
| 14:45 | 56285 | 0.344 |
| 15:00 | 57959 | 0.32 |
| 15:15 | 53862 | 0.33 |
| 15:30 | 68613 | 0.365 |
| 15:45 | 93226 | 0.311 |
| 16:00 | 71828 | 0.284 |
RELATED POSTS:
What Every Short-Term Trader Should Know
Finding Opportunity inwards the Stock Market
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Tuesday, January 15, 2019
Info!! Trading Notes: Calendar Week Of October 5Th
Friday, Oct 9th
* Morning selling push clit per unit of measurement area yesterday could non breach overnight as well as prior 24-hour interval lows, continuing the apartment correction. In general, when overnight as well as prior 24-hour interval lows/highs concur on early on 24-hour interval selling/buying, it's worth thinking nearly buying the dip/selling the bounce to exploit the potential designing of higher lows/lower highs. With the Fed minutes, pregnant buying flows ane time over again returned to stocks as well as nosotros over again made novel highs for this move, alongside an expansion inwards the lay out of shares registering fresh highs. H5N1 total of 242 SPX stocks registered fresh 20-day highs vs. lows, the highest since August 17th (raw information from Index Indicators). As emphasized yesterday, I'm non seeing the kinds of divergences that would ordinarily precede a substantial correction. We're ane time over again stretched on a multi-day basis, as well as therefore that leaves me inwards the style of buying pullbacks.
* Earlier entries mentioned the real strong buying push clit per unit of measurement area during this rise. On a five-day basis, we've seen buying forcefulness that has alone been introduce on nine prior occasions since 2012. Ten days later, SPX was upward 8 times, downward ane time for an average gain of nearly +3.0%. Once again, this highlights the momentum upshot ane time institutions dominate on the buying side.
* Volatility continues to decline, alongside VIX straight off below 18. If this is similar past times strong buying cycles, nosotros volition run into pocket-size pullbacks as well as farther grind higher on lower volatility until breadth divergences stimulate to appear.
Thursday, Oct 8th
* Buying dips indeed proved to move a useful strategy inwards Wednesday's session, equally nosotros closed ane time over again alongside strength. Across all exchanges, nosotros saw over G stocks register fresh monthly highs, a novel high for this upleg. In full general I don't decease overly concerned nearly sustained downmoves unless nosotros run into a preceding menses of fourth dimension inwards which fewer stocks participate inwards the strength. Thus far, the participation has been solid, alongside the buying push clit per unit of measurement area mentioned yesterday continuing strong. We're quite extended inwards the curt run, as well as therefore the consolidation we're seeing inwards overnight trading is non unusual. My leaning is to permit this consolidation to run its course of report earlier resuming long positions. Even inwards salubrious uptrends, it's non odd to acquire a pullback inwards which the bulk of shares merchandise below their iii as well as 5-day moving averages. I'd facial expression at such a pullback equally a potential buying opportunity; I'd likewise move interested inwards buying whatever flattish correction that stays higher upward the 1960-ish level.
* Note that VIX continues lower as well as continues to remain below 20. I proceed to take away heed people lay the comport thesis out there, but the marketplace is but non trading that agency at present. I believe investors run into the global weakness out at that topographic point as well as are already buying stocks inwards anticipation of farther easing from cardinal banks. Traders who hold back for the actual cardinal banking concern announcements earlier buying may move making a mistake. With Friday's weak jobs lay out inwards the U.S., an accomodative monetary policy across the the world was pretty good ensured. Markets are forrad looking.
* Below you lot tin run into a short-term charge per unit of measurement of alter indicator (red) plotted vs. ES futures (10/2/15 to the present), where each bar represents 500 cost changes inwards the index. This normalizes for activeness during wearisome periods, such equally overnight. I similar the perspective equally a short-term overbought/oversold measure. In general, I similar buying oversold levels when we're making higher lows as well as higher highs as well as vice versa. I similar taking profits when nosotros acquire overbought/oversold as well as can't brand novel highs/lows.
Wednesday, Oct 7th
* We did indeed acquire the consolidation noted inwards yesterday's postal service and, as well as therefore far, we're seeing some belongings of the consolidation as well as buying of the dip inwards overnight trading. I'm watching to run into if nosotros tin concur those overnight lows, alongside a leaning toward buying weakness that holds higher upward ES 1960. My short-term models remain modestly bearish, however, as well as therefore I'm opened upward to the possibility of farther consolidation.
* Readers volition retrieve that I interruption the uptick/downtick statistics into split upward measures of buying push clit per unit of measurement area as well as selling pressure. The buying push clit per unit of measurement area has been real strong over the past times v trading sessions. Returns 3-5 days out conduct hold been choppy, alongside picayune edge, but 10 days out nosotros run into fifteen occasions up, 2 downward for an average gain of over 2%. We'll ask to run into distinct selling push clit per unit of measurement area to entertain a provide to a bearish regime; we'd likewise ask to run into VIX top 20.
* Put/call ratios conduct hold come upward downward quite a chip from the recent marketplace lows. That's some other argue I wouldn't move surprised past times sloppy trading nigh term. I likewise banker's complaint the upside breakouts inwards emerging marketplace currencies (CEW) as well as commodities (DBC); both are reversals of the previous bearishness unopen to China.
Tuesday, Oct 6th
* Great summary of my recent podcast alongside Better System Trader from The Waiter's Pad; thanks, Mike!
* We saw real proficient follow through to Friday's strength, equally the volatility addition the buying flows (volume-weighted NYSE TICK) created pregnant upside momentum. We saw 780 stocks across all exchanges brand fresh one-month highs against 143 novel lows. We've come upward off a chip overnight as well as my models are moderately bearish over a 3-5 24-hour interval horizon, as well as therefore some consolidation is to move expected. My sense, however, is that many traders conduct hold missed this rally as well as volition move interested inwards buying dips, which could maintain consolidations modest--as much inwards fourth dimension equally inwards price.
* Another argue I facial expression some consolidation is that we're quite stretched on a short-term basis, alongside over 90% of SPX shares trading higher upward their 3, 5, as well as 10-day moving averages. When we've had a moderate VIX nether those circumstances (between fifteen as well as 25; due north = 12 going dorsum to 2006), the side past times side 24-hour interval has been upward iii times, downward nine for an average loss of -.12%. Indeed, 10 of the 12 occasions posted a lower unopen over the side past times side ii trading days. That beingness said, the side past times side 10 days conduct hold been 8 up, four downward for an average gain of +.37%, alongside 10 of the 12 occasions posting a higher unopen inside v trading days. So non much border inwards general, though my base of operations instance is to run into consolidation inwards the side past times side 24-hour interval or ii that is worth buying into.
* I mentioned yesterday that I'm keeping an optic on VIX. We're below twenty for the kickoff fourth dimension inwards a while; if whatever consolidation does occur inwards a flattish fashion, reducing realized volatility, that would advise a provide to the onetime volatility government as well as would move bullish overall for stocks.
Monday, Oct 5th
* In my Forbes blog, I review ane of the best marketplace books I've read inwards a long time. It's a detailed handling of high yield markets as well as a peachy reminder of how nosotros tin larn a peachy bargain nearly the markets nosotros merchandise past times studying as well as agreement related markets.
* Fri was a 24-hour interval worth studying inwards detail. We had a weak payrolls lay out as well as stock futures sold off hard. We opened alongside selling on the day, equally NYSE TICK hitting several quite negative figures, but cost stopped going lower as well as the downticks began making higher lows. This emboldened buyers to come upward in, upticks swamped downticks, as well as nosotros injure upward alongside a real strong 24-hour interval to the upside. That forcefulness has continued into overnight trading, equally it indeed appears that nosotros conduct hold successfully tested the downside. The oversold intermediate-term indicators that I referenced final calendar week volition non hitting overbought levels for a spell as well as volatility appears to move at the bull's back, as well as therefore I facial expression an surroundings inwards which pullbacks volition move bought.
* I volition move watching VIX closely here. One thought I'm playing alongside is that we've entered a higher volatility regime, much equally what happened inwards 2007 prior to the 2008 comport market. VIX mostly bottoms ahead of stock marketplace highs and, inwards the electrical flow environment, that wouldn't surprise me. That 2007 menses was a rangy topping marketplace alongside proficient swings due to the higher volatility.
* Morning selling push clit per unit of measurement area yesterday could non breach overnight as well as prior 24-hour interval lows, continuing the apartment correction. In general, when overnight as well as prior 24-hour interval lows/highs concur on early on 24-hour interval selling/buying, it's worth thinking nearly buying the dip/selling the bounce to exploit the potential designing of higher lows/lower highs. With the Fed minutes, pregnant buying flows ane time over again returned to stocks as well as nosotros over again made novel highs for this move, alongside an expansion inwards the lay out of shares registering fresh highs. H5N1 total of 242 SPX stocks registered fresh 20-day highs vs. lows, the highest since August 17th (raw information from Index Indicators). As emphasized yesterday, I'm non seeing the kinds of divergences that would ordinarily precede a substantial correction. We're ane time over again stretched on a multi-day basis, as well as therefore that leaves me inwards the style of buying pullbacks.
* Earlier entries mentioned the real strong buying push clit per unit of measurement area during this rise. On a five-day basis, we've seen buying forcefulness that has alone been introduce on nine prior occasions since 2012. Ten days later, SPX was upward 8 times, downward ane time for an average gain of nearly +3.0%. Once again, this highlights the momentum upshot ane time institutions dominate on the buying side.
* Volatility continues to decline, alongside VIX straight off below 18. If this is similar past times strong buying cycles, nosotros volition run into pocket-size pullbacks as well as farther grind higher on lower volatility until breadth divergences stimulate to appear.
Thursday, Oct 8th
* Buying dips indeed proved to move a useful strategy inwards Wednesday's session, equally nosotros closed ane time over again alongside strength. Across all exchanges, nosotros saw over G stocks register fresh monthly highs, a novel high for this upleg. In full general I don't decease overly concerned nearly sustained downmoves unless nosotros run into a preceding menses of fourth dimension inwards which fewer stocks participate inwards the strength. Thus far, the participation has been solid, alongside the buying push clit per unit of measurement area mentioned yesterday continuing strong. We're quite extended inwards the curt run, as well as therefore the consolidation we're seeing inwards overnight trading is non unusual. My leaning is to permit this consolidation to run its course of report earlier resuming long positions. Even inwards salubrious uptrends, it's non odd to acquire a pullback inwards which the bulk of shares merchandise below their iii as well as 5-day moving averages. I'd facial expression at such a pullback equally a potential buying opportunity; I'd likewise move interested inwards buying whatever flattish correction that stays higher upward the 1960-ish level.
* Note that VIX continues lower as well as continues to remain below 20. I proceed to take away heed people lay the comport thesis out there, but the marketplace is but non trading that agency at present. I believe investors run into the global weakness out at that topographic point as well as are already buying stocks inwards anticipation of farther easing from cardinal banks. Traders who hold back for the actual cardinal banking concern announcements earlier buying may move making a mistake. With Friday's weak jobs lay out inwards the U.S., an accomodative monetary policy across the the world was pretty good ensured. Markets are forrad looking.
* Below you lot tin run into a short-term charge per unit of measurement of alter indicator (red) plotted vs. ES futures (10/2/15 to the present), where each bar represents 500 cost changes inwards the index. This normalizes for activeness during wearisome periods, such equally overnight. I similar the perspective equally a short-term overbought/oversold measure. In general, I similar buying oversold levels when we're making higher lows as well as higher highs as well as vice versa. I similar taking profits when nosotros acquire overbought/oversold as well as can't brand novel highs/lows.
Wednesday, Oct 7th
* We did indeed acquire the consolidation noted inwards yesterday's postal service and, as well as therefore far, we're seeing some belongings of the consolidation as well as buying of the dip inwards overnight trading. I'm watching to run into if nosotros tin concur those overnight lows, alongside a leaning toward buying weakness that holds higher upward ES 1960. My short-term models remain modestly bearish, however, as well as therefore I'm opened upward to the possibility of farther consolidation.
* Readers volition retrieve that I interruption the uptick/downtick statistics into split upward measures of buying push clit per unit of measurement area as well as selling pressure. The buying push clit per unit of measurement area has been real strong over the past times v trading sessions. Returns 3-5 days out conduct hold been choppy, alongside picayune edge, but 10 days out nosotros run into fifteen occasions up, 2 downward for an average gain of over 2%. We'll ask to run into distinct selling push clit per unit of measurement area to entertain a provide to a bearish regime; we'd likewise ask to run into VIX top 20.
* Put/call ratios conduct hold come upward downward quite a chip from the recent marketplace lows. That's some other argue I wouldn't move surprised past times sloppy trading nigh term. I likewise banker's complaint the upside breakouts inwards emerging marketplace currencies (CEW) as well as commodities (DBC); both are reversals of the previous bearishness unopen to China.
Tuesday, Oct 6th
* Great summary of my recent podcast alongside Better System Trader from The Waiter's Pad; thanks, Mike!
* We saw real proficient follow through to Friday's strength, equally the volatility addition the buying flows (volume-weighted NYSE TICK) created pregnant upside momentum. We saw 780 stocks across all exchanges brand fresh one-month highs against 143 novel lows. We've come upward off a chip overnight as well as my models are moderately bearish over a 3-5 24-hour interval horizon, as well as therefore some consolidation is to move expected. My sense, however, is that many traders conduct hold missed this rally as well as volition move interested inwards buying dips, which could maintain consolidations modest--as much inwards fourth dimension equally inwards price.
* Another argue I facial expression some consolidation is that we're quite stretched on a short-term basis, alongside over 90% of SPX shares trading higher upward their 3, 5, as well as 10-day moving averages. When we've had a moderate VIX nether those circumstances (between fifteen as well as 25; due north = 12 going dorsum to 2006), the side past times side 24-hour interval has been upward iii times, downward nine for an average loss of -.12%. Indeed, 10 of the 12 occasions posted a lower unopen over the side past times side ii trading days. That beingness said, the side past times side 10 days conduct hold been 8 up, four downward for an average gain of +.37%, alongside 10 of the 12 occasions posting a higher unopen inside v trading days. So non much border inwards general, though my base of operations instance is to run into consolidation inwards the side past times side 24-hour interval or ii that is worth buying into.
* I mentioned yesterday that I'm keeping an optic on VIX. We're below twenty for the kickoff fourth dimension inwards a while; if whatever consolidation does occur inwards a flattish fashion, reducing realized volatility, that would advise a provide to the onetime volatility government as well as would move bullish overall for stocks.
Monday, Oct 5th
* In my Forbes blog, I review ane of the best marketplace books I've read inwards a long time. It's a detailed handling of high yield markets as well as a peachy reminder of how nosotros tin larn a peachy bargain nearly the markets nosotros merchandise past times studying as well as agreement related markets.
* Fri was a 24-hour interval worth studying inwards detail. We had a weak payrolls lay out as well as stock futures sold off hard. We opened alongside selling on the day, equally NYSE TICK hitting several quite negative figures, but cost stopped going lower as well as the downticks began making higher lows. This emboldened buyers to come upward in, upticks swamped downticks, as well as nosotros injure upward alongside a real strong 24-hour interval to the upside. That forcefulness has continued into overnight trading, equally it indeed appears that nosotros conduct hold successfully tested the downside. The oversold intermediate-term indicators that I referenced final calendar week volition non hitting overbought levels for a spell as well as volatility appears to move at the bull's back, as well as therefore I facial expression an surroundings inwards which pullbacks volition move bought.
* I volition move watching VIX closely here. One thought I'm playing alongside is that we've entered a higher volatility regime, much equally what happened inwards 2007 prior to the 2008 comport market. VIX mostly bottoms ahead of stock marketplace highs and, inwards the electrical flow environment, that wouldn't surprise me. That 2007 menses was a rangy topping marketplace alongside proficient swings due to the higher volatility.
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