Trading Notes: Calendar Week Of September 14Th

Friday, September 18th

*  In a feel for stocks, non a lot changed amongst the Fed meeting, equally a hike is yet inwards play for after this year, but fiscal weather condition are non justifying a hike at this time.  We traded higher upwards the recent hit together with since possess got fallen dorsum into the range, equally we’re similar a shot intermediate-term overbought.  Selling buying forcefulness inwards NYSE TICK that cannot generate fresh cost highs is my full general approach going forward; models modestly bearish.

*  This posting is belatedly inwards role because of my participation inwards a podcast for the Better System Trader site.  Do depository fiscal establishment agree out their podcast page; it’s an fantabulous fix of resources.  Will link my podcast when it’s upwards early on this coming week.

Thursday, September 17th

*  We saw modest buying clit per unit of measurement area early on inwards the session on Wednesday, followed past times a notable absence of selling interest, amongst NYSE TICK largely staying higher upwards the -500 level.  This was significant, given that nosotros were trading at a short-term overbought grade close a hit high.  Unlike inwards previous situations, those weather condition did non convey out sellers, together with the resultant was an upside breakout on rigid breadth.  It was a swell representative of how indicators together with models tin alarm traders to directional tendencies, but it is genuinely the record activity that makes for adept intraday trades.

*  I similar a shot demo over 70% of SPX stocks higher upwards their 20-day moving averages together with good over 80% higher upwards their 3, 5, together with 10-day averages.  While my models advise the likelihood of pullback over a 3-5 hateful solar daytime horizon, activity clearly volition last dominated past times perceptions of the Fed determination together with charge per unit of measurement guidance after today.

*  Given the dubiety of the resultant of the Fed coming together together with the odd attending placed on this meeting, I aspect considerable volatility surrounding the proclamation together with press conference.

Wednesday, September 16th

*  We did indeed concur recent lows on early on selling clit per unit of measurement area on Tuesday, leading to a venture rally toward the hit highs.  We’re overbought across a let on of the measures that I follow; the nautical chart below tracks the percent of SPX stocks trading higher upwards their 3, 5, 10, together with 20-day moving averages (raw information from Index Indicators).  In general, when a minority of stocks are trading higher upwards their 100-day averages, my models indicate to subnormal returns when short-term breadth is rigid together with superior returns when short-term breadth is weak.  My leaning is to sell bounces that cannot accept out the overnight together with previous day’s highs.

*  I’m hearing quite a dispersion of views regarding what the Fed mightiness practice tomorrow, which leads me to believe a reasonable proportion of traders volition perceive themselves to last offsides.  That could contribute to pregnant volatility.  I was surprised past times the relatively depression index together with equity put/call ratios yesterday; both were the lowest inwards the past times 2 weeks.  That has tended to atomic number 82 to subnormal returns over a adjacent 3-5 hateful solar daytime horizon.

Tuesday, September 15th

*  We saw internet selling flows on the hateful solar daytime Monday, but it was a tranquillity vacation merchandise together with nosotros held higher upwards the recent back upwards around ES 1928-1930.  New monthly highs expanded to 306; lows dropped to 298, across all exchanges.  So piece at that spot was internet selling pressure, breadth did non deteriorate.  That unremarkably has me looking for a bounce, especially if nosotros tin concur the overnight lows inwards early on merchandise today.  One of my models is modestly bearish; 1 modestly bullish–not odd to larn weak together with indecisive signals inwards a hit market, equally the models pick upwards overbought together with oversold extremes.  I suspect nosotros could consider a continuation of the hit merchandise going into Thursday’s FOMC meeting.

*  Below is a nautical chart of an 80-period charge per unit of measurement of alter mensurate for ES, where each stream represents 50,000 contracts traded.  I’ve flora overbought/oversold measures that normalize for book traded to last quite helpful inwards putting overnight activity into context together with adjusting to faster together with slower marketplace conditions.  We’re bouncing off an oversold condition; I’m watching the character of this bounce carefully.

*  The CBOE $SKEW mensurate is at its highest grade inwards a while.  That agency that out of the coin lay options are existence bid upwards ahead of the Fed.  Interestingly, as I noted a piece back, skew is non necessarily a reverse indicator.  Near-term returns next high skew readings possess got been subnormal.

Monday, September 14th

*  What I consider amid successful traders is a network of successful relationships.  There is but also much to follow inwards markets to merchandise inwards a completely siloed fashion.  That is why fifty-fifty independent traders together with solo portfolio managers cultivate rigid information networks together with back upwards systems.  There is a fundamental to edifice rigid relationships that I of late wrote about; ultimately it’s a critical role of one’s long-term border inwards markets.  The strongest individuals larn that way past times cultivating rigid teams.

*  My models are modestly bearish over a 3-5 hateful solar daytime horizon, but I aspect the week’s trading to last dominated past times Thursday’s Fed meeting.  The signals I’ll last taking volition last largely intraday together with tactical upwards to that point.  The setups that possess got worked best lately possess got been periods of buying/selling that dry out upwards earlier making a fresh novel high or low–it’s a designing mutual to hit markets.  I job NYSE TICK equally a proxy for buying together with selling interest; also the percentages of stocks trading higher upwards their short-term moving averages.

*  Not everything is trading weak, equally a savvy trader pointed out to me over the weekend.  Fully 32% of SPX stocks are trading higher upwards their 20-day moving averages, non together with then bad after the form of driblet nosotros had inwards August.  Homebuilders (XHB) possess got been notably strong, equally possess got been some of the tech leaders similar AMZN. I noticed a let on of bearish articles inwards fiscal media the concluding distich of days.  Very hard to notice people inwards an chance mindset.  While I practice squall back nosotros could consider follow through weakness, I practice squall back character companies amongst security dividends volition maintain to aspect adept inwards a globe that remains largely inside QE regimes.

*  Despite a bounce inwards stocks on Friday, nosotros had exclusively marginally to a greater extent than monthly highs on the hateful solar daytime (237 vs. 213 across all exchanges) together with to a greater extent than monthly lows (368 vs. 305).  I am watching breadth closely for clues equally to management of the eventual breakout from the recent trading range.  

Leave a Reply