Info!! Weak Dollar, Potent Commodities

We're seeing the U.S. dollar intermission downwardly versus the euro (top chart) as well as stone oil (bottom chart) intermission to the upside, amongst aureate making multi-week highs every bit well.

With depression involvement rates as well as rise national debt, the dollar is non every bit attractive every bit a currency, with several countries expressing involvement inwards farther diversifying their reserves. With the Fed contemplating farther "quantitative easing", the marketplace position fears that the dollar printing press volition endure working overtime. That is lending back upwardly to commodities denominated inwards dollars.
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Info!! Trading Notes For The Calendar Week Of April 11, 2016

Friday, Apr 15th

*  Adam Grimes offers perspectives on mastering trading fears.  It's i argue postulate a opportunity management is in addition to then important.  If losses larn emotionally debilitating, they inevitably consequence inwards hereafter misfortunate trades in addition to missed opportunities.

*  Stocks traded inwards a slow, narrow attain yesterday.  Breadth tailed off a bit, only fresh monthly highs overstep along to significantly outnumber novel lows:  1009 vs. 110.  About 65% of SPX stocks unopen inwards a higher house their three-day moving averages, downwardly from over 85% yesterday.  If the recent deed to novel highs was indeed a breakout move, nosotros should run into upside follow through in addition to decent book on such a move.  Stalling on irksome book gives me pause.  H5N1 faux breakout would trap a lot of belatedly bulls.

*  We overstep along to run into an growth inwards shares outstanding for the SPY ETF.  That has led to subnormal near-term returns inwards SPY on average; it's a useful view gauge.

*  Recent sessions bring shown a notable absence of selling clit per unit of measurement area from institutions on the upticks/downticks measure.  As long equally that's the case, it's hard to imagine much of a correction inwards stocks.  Conversely, an expansion of downticks (selling pressure) would survive an early on sign of potential authorities shift.
 

Thursday, Apr 14th

*  More must reading each week: Why earnings expectations are of import in addition to cracking weekly summaries from Dash of Insight.

*  Stocks moved to novel rally highs yesterday with company breadth.  Across all exchanges nosotros had 1084 monthly novel highs against 119 novel lows, the strongest reading since belatedly March.  While the novel highs aren't quite equally strong equally readings terminal month, the relative absence of shares making novel lows is telling.  The marketplace to a greater extent than oftentimes than non makes important reversals from highs when private sectors recess down.  I'm non seeing that breakdown in addition to then far.

*  Another perspective tin survive constitute inwards the cumulative pose out of purchase signals versus sell signals with all NYSE stocks across multiple technical indicators (see below).  During 2015, this mensurate trended lower equally groups of stocks failed to participate inwards marketplace strength.  Now nosotros tin run into it trends higher.

*  At a to a greater extent than micro level, cumulative upticks versus downticks with NYSE shares too continues quite strong.  This mensurate oftentimes trails off when nosotros run into weakness with smaller cap shares.  I'm non seeing that weakness at present.

*  All that beingness said, a pose out of my measures are stretched to the upside instantly (over 90% of SPX shares unopen inwards a higher house their 50-day moving averages in addition to over 80% inwards a higher house their 3 in addition to 5-day averages), in addition to then it wouldn't survive odd to run into about consolidation.  Note that pullbacks inwards breadth (below) bring occurred at successively higher toll lows.  

Wednesday, Apr 13th

*  Every 24-hour interval I'll drive to seat a specially adept reading pertaining to markets.  This volition too assist to highlight people doing adept work.  Here's an unusually thought-provoking post on stock marketplace valuation from David Merkel at Aleph Blog.

*  Stocks traded steadily higher yesterday on the heels of positive crude news.  We've since added to those gains inwards premarket trading in addition to facial expression to examination recent highs.  Interestingly, breadth is lagging a chip here.  Across all exchanges, fresh monthly novel highs dropped from 598 to 577 in addition to novel monthly lows rose from 281 to 332.  Here's how the three-month novel highs vs. lows facial expression at this juncture:

*  Buying involvement continues to swamp selling clit per unit of measurement area on the upticks/downticks measure.  The cumulative ticks bring broken to a novel high (see nautical chart below) in addition to institutional participation (total upticking in addition to downticking) has been strong. That has led to positive near-term returns on a short-term basis.

*  Since March 21st, we've seen internet portion creation inwards the SPY ETF, i of my favorite view measures.  Returns bring tended to survive best when we've seen internet redemptions.


Tuesday, Apr 12th

*  Some splendid wisdom inwards the Abnormal Returns interview with Matt Hall, including making investing in addition to trading check into your life in addition to non the reverse.

*  Stocks finished with a belatedly selloff afterward early on forcefulness in addition to bring since bounced a chip higher inwards overnight trade.  Bottom business is that nosotros overstep along inwards a attain trade.  Despite the selloff, advancing stocks outnumbered declining shares.  New monthly highs across all exchanges rose to 598 in addition to monthly lows dipped to 281.  About 50% of SPX shares unopen inwards a higher house their 3-day moving averages in addition to 46% inwards a higher house their 20-day averages--the kinds of numbers yous mightiness facial expression inwards a attain market.

*  Year to date, equally the graphic from FinViz suggests, we've seen forcefulness with utility in addition to basic textile shares (falling rates in addition to the bounce inwards commodities bring helped) in addition to weakness with fiscal in addition to healthcare shares.  It's been a bull marketplace for about sectors in addition to bearish for others--quite a mixed performance. 

*  U.S. of America dollar weakness has corresponded to the stream of higher commodities in addition to higher prices for overseas stocks equally good equally U.S. of America ones.  At about betoken dollar weakness volition larn overpositioned to the betoken where nosotros could run into a meaningful unwind; that would survive a potential risk-off scenario to survive on the spotter for.  We're having problem sustaining weakness equally long equally a weak dollar helps global economies.

Monday, Apr 11th

*  You're running your trading inwards a smart way, only are yous running it inwards an emotionally intelligent way?

*  We overstep along to merchandise inwards a range, equally stocks on Fri to a greater extent than oftentimes than non unopen higher only off their lows.  As of Friday's close, nosotros saw novel monthly highs expand from 385 to 476 in addition to fresh monthly lows drib from 517 to 295.  That 517 novel monthly lows was the weakest reading we've seen since the uptrend launched inwards February; I'm watching carefully to run into if it holds.  Significantly fewer than 50% of stocks unopen on Fri inwards a higher house their 3, 5, in addition to 10-day moving averages.  (Data from Index Indicators).  I would survive concerned for the bull trading illustration if nosotros cannot sustain a bounce from here.

*  Commodity-related shares (XLB, XLE), consumer staples (XLP), in addition to healthcare (XLV) bring been relatively strong inwards recent sessions; retail (XRT) in addition to fiscal (XLF) shares bring been relatively weak.  Note the item relative weakness of regional banks (KRE) in addition to the continued crushing of yields inwards the Treasury (TLT) in addition to high character corporate (LQD) areas.  The banking sector index ($BKX) looks anemic.  If nosotros were to bring problems unraveling the bull, my vote goes to the banking group.

*  Continued concerns almost pension shortfalls are inwards the media.  One someone is quoted equally maxim that 7+% annual returns over the long haul are reasonable for pension fund payout assumptions.  Reminds me of assurances almost ongoing 7% growth inwards China, even equally outflows continue.  In a solid set down of crushed yield, it seems to me pension funds cannot attain targeted returns without enhanced risk-taking.  That is scary.  

*  Across a attain of technical systems, we've seen a tailing off of purchase signals relative to sells, with the 2 almost fifty-fifty equally of Friday's close. 

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

Friday, November 13th

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

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

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

Thursday, Nov 12th

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

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

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

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

Wednesday, Nov 11th

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

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

Tuesday, Nov 10th

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

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

Monday, Nov 9th

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

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

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

Info!! Trading Notes 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!! Midday Briefing For August 7Th: Shifting Themes

With strong jobs data, we've seen the dollar rally sharply against the euro as well as stocks rally strongly to novel bull highs, led yesteryear the fiscal sector.

Note the inversion of recent themes: hither we're seeing rigid stock prices on the heels of a rigid dollar as well as weak commodities. Note every bit good the continued relative underperformance of the NASDAQ 100 stocks, every bit good every bit commodity-sensitive liberate energy as well as materials shares. Indeed, the novel highs inwards the S&P 500 Index (ES, above) are non confirmed yesteryear several sectors, including XLP, XLV, XLE, XLB, as well as XLK.

I volition endure watching closely to run into if nosotros tin sustain the electrical flow strength--and every bit good to run into if we're seeing the get-go of shifting intermarket themes.
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Info!! Recent Intermarket Relationships On The Radar

Some intermarket relationships impacting recent trading: weak stocks (top chart), weak dollar versus euro (second nautical chart from top), strong gold (second nautical chart from bottom), rising Treasury rates (bottom chart). Could nosotros move looking at inflation sooner than expected? If so, that would accept of import implications for Federal Reserve policy, involvement rates, commodities, as well as the prospects for sustained economical recovery.
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Info!! Tracking Marketplace Themes Inwards Existent Time

the context that helps active traders frame their ideas. Note roughly of the themes from today's market:

1) Price describe across the wide market, alongside advancing stocks outnumbering decliners past times virtually 1800 issues equally I write;

2) Lack of intraday selling sentiment, alongside no NYSE TICK values below -800 equally I write;

3) Strong commodities together with weak U.S. of A. dollar, inward the wake of positive economical intelligence out of China.

The topic of economical strength--in the U.S. of A. equally good equally emerging markets-- is going to endure ane worth watching early on inward 2010.

Meanwhile, equally I'm watching the marketplace since posting the nautical chart above, I'm besides noticing a novel daily depression inward TICK. The NQ futures are barely positive on the day, together with we're seeing notable relative weakness amid Consumer Discretionary shares. It's the existent fourth dimension updating of marketplace information that tells us when themes are continuing to concur sway, together with when they're losing traction.

More:

Thinking inward Themes

Sentiment together with Cumulative TICK

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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!! 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!! Pre-Opening Briefing: Shift To A Downtrend

the non-confirmations with the indicators I track together with has too been reflected inwards recent indicator readings, which I discover via Twitter (follow here) prior to each marketplace position open: to a greater extent than novel 20-day lows than highs; Supply exceeding Demand; less than 50% of stocks trading inwards a higher house their 20-day moving averages, etc.

We should rest below the early on June arrive at to sustain the downtrend. I'll endure tracking intraday thought together with intermarket themes (strong dollar, weak commodities) via the tweets to run into if nosotros tin sustain the downside.

8:23 AM CT - In the summit Market Delta chart, nosotros run into that we're edifice value at the depression destination of yesterday's trading range, equally in-line inflation numbers at 7:30 AM CT could non sustain a motion to the upper destination of the overnight range. With credence of lower value, nosotros come about on the short-term downtrend intact, with short-term resistance at 908/909.
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Info!! Midday Briefing For September 25Th: Downside Break

Note the expanded selling book (and overall volume) equally large traders sold the ES futures equally nosotros neared the morning time lows. The inability to sustain buying inward a higher house vwap (and greater book at bid vs offer) were of import downside tells, equally were the intermarket themes of strong dollar as well as weak commodities equally the morning time wore on. This sets upward the before morning time lows (and high book regions highlighted yesteryear the arrows) equally potential resistance for bounces.
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Info!! Trading Notes For The Calendar Week Of March 7, 2016

Friday, March 11th

*  Thursday's ECB coming together brought stock buying together with euro selling--and together with therefore a sudden reversal of both during the twenty-four hr flow earlier a rally belatedly inwards the twenty-four hr flow together with overnight brought us dorsum toward the highs.  As the one-hour oscillator of upticks/downticks for all listed stocks shows below, the selling was quite wide during yesterday's selloff together with the buying has been wide on the reversal.  New highs vs. lows for listed stocks deteriorated yesterday, therefore I volition endure watching breadth going forrad to view if participation expands or contracts on upside moves.

*  We've turned downward on the cumulative publish of purchase vs. sell signals given past times the Wilder Parabolic-SAR system.  That tracks all NYSE shares on an end-of-day dry reason (raw information from Stock Charts).  Note that, during vigorous upward wheel phases, such every bit nosotros had inwards Oct of final year, the cumulative SAR stair out volition peak ahead of price.  So far, during the deterioration inwards the measure, toll has held upwardly well.  I thin toward buying weakness that remains higher upwardly yesterday's lows.

 
*  I noticed some underperformance of minor cap shares yesterday.  One twenty-four hr flow does non brand a trend, only during the vigorous ascent from the Feb lows, minor caps were outperformers.  I volition endure watching that relative performance going forward, every bit it could offering clues every bit to the eventual turning of the cycle.


Thursday, March 10th

*  Midweek saw rangebound markets, every bit selling greeted early on strength, only stocks past times together with large held against their prior day's lows.  We closed amongst nether 50% of SPX stocks nether their three together with 5-day moving averages.  Going into the ECB announcement, nosotros quest to view the lows of the final 2 days concord upwardly inwards lodge to maintain the vigorous uptrend from the Feb lows.

*  Here is a nautical chart of the publish of NYSE stocks giving purchase signals versus sell signals amongst observe to their Bollinger Bands--a really useful stair out of wide marketplace forcefulness vs. weakness.  Note the upthrust from the Feb lows, followed past times a pullback inwards purchase signals, only non at a betoken where we're getting internet sell signals.  It is mutual for thrusts higher inwards the Bollinger stair out to endure followed past times farther toll strength; marketplace rises conk vulnerable when nosotros laid about seeing internet sell signals. Note how thrusts lower inwards the stair out convey represented practiced buying opportunities every bit a whole.

*  I late wrote on the theme of a powerful stair out of stock marketplace sentiment.  Interestingly, that stair out shows a internet reduction of SPY shares outstanding over the past times 5, 10, together with 20 trading sessions.  That configuration has tended to Pb to toll gains over the side past times side 5-20 trading sessions.


Wednesday, March 9th

*  Monday's post talked most a normal correction from stretched levels together with nosotros got that yesterday, every bit most 19% of SPX stocks closed higher upwardly their 3-day moving averages together with 26% higher upwardly their 5-day averages.  In an uptrend, nosotros await short-term oversold levels to tumble out at successively higher toll lows.  We're seeing a bounce inwards overnight merchandise together with my base of operations instance is that yesterday's lows concord every bit nosotros ready a examine of the recent highs.  Of course, marketplace reply to tomorrow's ECB proclamation could convey a lot to do amongst whether that base of operations instance plays out or not.

*  Yesterday, stocks across all exchanges making fresh monthly highs dropped from 1720 to 719; novel lows rose from fourscore to 88.  In general, I exclusively conk concerned most the reversals of wheel uptrends when novel lows expand meaningfully.  The past times calendar week we've had the lowest publish of novel monthly lows inwards years.  The absence of weakness ends upwardly beingness every bit rigid a predictor every bit the presence of strength.  Markets mostly plough because i or to a greater extent than sectors are rolling over, creating the expansion of novel lows.

*  Here's a aspect at the performance of major stock marketplace sectors from the Finviz site.  Note how the sectors that led performance on the downside (utilities) are instantly lagging together with how those most wound inwards the downturn (raw materials) are instantly leading performers.  If the uptrend is to continue, nosotros would desire to view wide participation of the sectors; a rally amongst rigid sector rotation is what oft leads to a to a greater extent than prolonged correction.

 


Tuesday, March 8th

*  After a sizable run higher, we're get-go to view signs of distribution.  While the publish of stocks across all exchanges hitting fresh monthly highs was impressive yesterday (1720), that publish was below the levels seen the prior twenty-four hr flow (2082) together with the twenty-four hr flow earlier that (1868).  Small cap together with midcap stocks maintain to outperform.  NASDAQ shares convey been relatively weak; commodity-related shares convey been relatively strong.  Consumer staples shares (XLP) striking a novel high yesterday, business office of a theme that I believe volition emerge inwards this the world of growing negative involvement rates:  the appeal of stable, high lineament stocks that offering relatively rubber together with attractive yields.  Such stocks are richly valued already, only could view bubble-like performance should key banks maintain downward the negative charge per unit of measurement path.

*  Commodities convey staged a important rally; DBC is instantly higher upwardly its Dec 31st unopen (see below).  The the US dollar (UUP) is downward on the year.  With ECB coming upwardly on Thursday, powerfulness nosotros endure pricing inwards important reflation, together with powerfulness the key banks inwards Nippon together with Europe endure embarking on stimulus measures higher upwardly together with beyond negative involvement rates together with bond-buying?  That would endure a most important macro development.

*  The recent selling to a greater extent than or less the 2000 grade inwards ES notwithstanding, I maintain to endure impressed past times the vigor of the rally off the Feb lows.  Note below how we've gone from an overbought province of affairs to an fifty-fifty to a greater extent than overbought one, amongst stocks moving steadily higher.  (Chart tracks SPX stocks making novel highs versus lows over 5, 20, together with 100-day lookback periods).  If indeed we're getting reflation from key banks, the implications for stocks would non endure short-term together with could maintain to powerfulness shares higher.

Monday, March 7th

*  If our trading does non supply these 4 psychological benefits, we're apt to underperform together with lose our powerfulness to perform inwards the zone.  We tin dismiss best handle our positions if we're managing ourselves well.

*  We saw some wide selling belatedly on Fri together with therefore far convey non been able to bounce inwards overnight trading.  Fri closed amongst over 80% of SPX stocks closing higher upwardly their 5, 10, 20, together with 50-day moving averages, only a waning pct closing higher upwardly their 3-day averages.  (Data from Index Indicators).  I would non endure surprised to view a normal correction of the recent strength; that should terminate higher upwardly the belatedly Feb lows to sustain the electrical current uptrend.  I would likewise non endure surprised to view subdued risk-taking ahead of this week's ECB meeting.

*  The intermediate-term wheel measures that I rail maintain to endure stretched to the upside.  Note how we've rallied inwards the human face upwardly of an "overbought" cycle.  That momentum suggests that we're non however at a betoken where nosotros would await the uptrend to meaningfully reverse.  

*  One stair out I rail is the volatility of marketplace breadth.  Specifically, I rail the volatility of the daily readings of SPX 500 stocks making fresh novel highs together with lows on a 5, 20, together with 100-day basis.  We late striking a meaningfully depression grade inwards that measure.  Since 2010, when we've been inwards the lowest quartile of readings for breadth volatility (as at present), the side past times side 5 days inwards SPX convey averaged a gain of exclusively .01%.  When we've been inwards the highest quartile, the side past times side 5 days inwards SPX convey averaged a gain of +.44%.  It's i to a greater extent than stair out that makes me opened upwardly to the possibility of some short-term correction of the recent marketplace strength.