Trading Notes: Calendar Week Of November 9Th

Friday, November 13th

*  We started Th weak simply non yet at levels corresponding to intermediate-term oversold.  The resulting strategy of selling bounces that could non require hold out prior (overnight) highs worked rattling good during the day, equally nosotros closed weak in addition to right away require hold traded lower during overnight hours. As I mentioned a spell ago, I’m impressed  past times the fact that many marketplace moves are starting fourth dimension during London hours in addition to 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 main drivers of stock prices are macro-related.  Recently, the merchandise inwards stocks has been less well-nigh turn a profit in addition to U.S. economic scheme in addition to to a greater extent than well-nigh currencies, involvement rates, in addition to cardinal banking firm dynamics.

*  With the recent weakness, we’re much closer to intermediate-term oversold levels per the nautical chart below, simply non quite at that spot across many indicators I track.  The opportunity alongside selling the bounces downwardly hither is that the short-covering rallies tin dismiss endure to a greater extent than violent.  Waiting for short-term overbought weather condition that tumble out at lower highs in addition to existence nimble on exits makes feel equally a twenty-four hours timeframe strategy.

*  One implication of the macro driver thought inwards a higher house is that tracking how other, correlated assets are trading (commodities, USD, rates, etc.) tin dismiss give unopen to 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 rattling accomplished trader.  Will most probable alive tweet marketplace observations.  Stock Twits handle is @steenbab.

*  We’ve made a duet of attempts to bounce off Monday’s lows in addition to none require hold been sustained.  Indeed, my breadth measures require hold modestly deteriorated during that fourth dimension in addition to I’m silent non showing us at levels that require hold 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 require hold out the overnight highs.

*  In general, nosotros tend to encounter elevated levels of pure volatility (volatility per unit of measurement of marketplace volume) at marketplace lows in addition to depression levels at marketplace peaks.  Interestingly, we’re much closer to levels associated alongside tops than bottoms.

*  I proceed to endure impressed past times how the vigorous rally inwards stocks has seemingly striking a wall inwards the wake of rising rates in addition to a stronger dollar.  That dynamic is rattling much on my radar.

Wednesday, Nov 11th

*  Tuesday attempted follow-through on Monday’s selling, simply at that spot were divergences amid the sectors relative to existence able to pause Monday’s lows.  The SPX held inwards a higher house those lows inwards a marketplace noted yesterday to endure short-term oversold.  That led to belatedly twenty-four hours buying which has continued overnight.  I’m viewing this equally business office of a topping procedure in addition to would endure surprised to encounter a strong, fresh bull leg here.  Buying weakness that holds inwards a higher house overnight in addition to previous day’s lows inwards anticipation of testing recent highs makes feel equally a short-term strategy.  I would lighten upwardly on forcefulness that leaves us alongside upside divergences.

*  Where I’m finding unopen to of the best short-term trading opportunities inwards the stock indexes is when nosotros acquire overbought or oversold weather condition followed past times an inability of stocks to proceed their upward or downward trajectory.  At such points bulls or bears are committed in addition to 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 drib dead lower or selling at the overbought points that can’t drib dead higher. 

Tuesday, Nov 10th

*  Monday’s marketplace was anything simply rotational, equally early, wide selling persisted through the morning. An of import agency of recognizing such a shift is past times tracking the early on distribution of NYSE TICK values, which guess the discover of upticks versus downticks amid all NYSE shares.  When that distribution is skewed to the downside in addition to 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 downwardly from their opens in addition to advance-decline numbers are weak, you lot know that this is a broader selloff in addition to non business office of mere rotation.

*  The selling has left us short-term oversold, alongside fewer than 20% of SPX shares trading inwards a higher house their three in addition to 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 in addition to TICK values closely to encounter if selling line per unit of measurement area is continuing or waning.  Meanwhile, nosotros are non oversold on an intermediate-term basis, per the nautical chart below, which tracks the discover of SPX stocks making fresh 5, 20, in addition to 100-day novel lows.  (Raw information from Index Indicators).  My working assumptions are that this correction has farther to drib dead simply likewise that the bull leg from belatedly 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 slow equally setting goals in addition to motivating ourselves alongside positive thinking, the psychology in addition to self-help sections of bookstores would endure quite a chip 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 modify ourselves.  Instead, nosotros acquire to supersede i laid of motivations–the ones that atomic number 82 to undesired actions in addition to consequences–with an existing, stronger laid of motivations.  In other words, nosotros modify past times drib dead to a greater extent than of who nosotros already are.  

*  We proceed alongside a rotational market, alongside unopen to sectors lately potent (financials, little caps) in addition to others weak (interest charge per unit of measurement sensitive utilities in addition to consumer staples shares).  (See the graphic from FinViz below).  Across all stocks, however, we’re seeing an increasing discover making short-term novel lows.  Fri saw 752 stocks across all exchanges register fresh monthly highs, simply likewise 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 require hold out prior overnight in addition to previous day’s highs, simply I likewise invention to fade weakness that cannot yield fresh cost lows in addition to expansion inwards the discover of stocks making novel lows.  In short, I’m treating this equally a rotational, hit marketplace until demonstrated otherwise. 

*  A large business office of the rotational dynamic, of course, is the recent displace higher inwards involvement rates in addition to inwards the U.S. dollar on the heels of potent economical numbers in addition to growing conviction of a Fed charge per unit of measurement hike.  Watching the currency in addition to rates markets volition endure of import inwards gauging moves for stocks overall in addition to for the sectors most impacted past times rates.  My best guess is that the markets are doing the Fed’s hiking for it, that Dec volition select an uber-dovish hike, in addition to that nosotros volition proceed alongside cardinal banking firm dubiousness 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 increase in addition to inflation on target.

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