We're Still Here..Literally!!!

Yes, we are at the same spot (still here) that we were at one year ago..within a percent or two, and as you can see from the SPY chart above, the market has been trading in that same zone off and on for the year.  The sell off in August 2015 and the sell off this January/February broke out of the zone but then the market just crawled right back into its comfort zone after each sell off.  The crawl that was much to the dismay of the doom and gloomers that have begun beating the drums saying that this market is about the crash.  Maybe, but maybe not.  I think the price action does a good job of indicating that there is substantial uncertainty in the market..uncertainty about the market falling but also having a healthy respect that is could go higher.  While a bunch of people are concerned that a correction is coming, there also seems to be an unwillingness to dismiss the idea of the market heading higher.  That's why I think we keep seeing the comfort zone.

Moral of this story is that there have been a couple of exceptional opportunities for short term traders to catch some meaningful moves if they were nimble enough but the majority of the equity people out there are not willing to place substantial bets on a bull or bear.  While August and January have the look of a potential roll over in the market, the traders and investors that are betting on or believe in the downside have been burned twice in less than 12 months..ouch.  I would bet a good amount of money that the big guys are not willing to step in front of the Federal Reserve Train that could come barreling down the track at any moment.  QE Infinity is a tough opponent and many professionals and retailers (always retailers though..don't know why I had to mention them) have been crushed by getting in it's way.

Really, this is just a post to say that not much is really going on in the market.  Sometimes markets are flat and sometimes they are choppy and every now and then we see them consistently trend.  Just use this time to make sure and have an understanding about what your trading/investing edge is and determine whether this environment is good for it or not.  I know of a few strategies that are making great returns right now and I can probably name 3 times as many that are under-performing the market because this is not the right market environment for the strategy.  Jesse Livermore said something to the effect of that he made most of his money by sitting on his hands.

George
TLT  

Where we really are in the market...

It feels like we've been brutally selling off since the market started trading this year..especially if you've been watching news, reading market commentary, etc.  I've had people that don't have anything to with the market, except for a $10k roth ira, start talking to me about the awfulness of the market and the price of oil. My gut feeling is that we've probably already seen the short term bottom or are very likely to it..both in oil and equities.

Take a look at this chart:

We are basically in the same zone that we were in after the post August sell off.  We basically sold to the same levels, it just took several weeks to accomplish rather than a couple of days like in August.  So why are people freaking out so much and why are they so certain that we're entering a bear market?  This is what I've been asking myself.  The answer is probably that we just haven't had much volatility over the last few years and there hasn't been that much to be concerned about.  Now we have oil crashing, china imploding, rates rising, and a war in the middle east that America and Europe are not really talking about or calling a war.  While I think we have seen a regime shift in the market and we will probably stay in an elevated volatility environment, I doubt that we're entering a big bear market..unless we have a huge market impacting event (terrorist attack, china actually implodes, sovereign default, etc.).  Short of any of those scenarios, I think we just see bigger chop in a bigger range.

Another chart worth looking at is a VIX chart with the ATR indicator.  The ATR of the VIX is basically the volatility of volatility, and this chart shows that a regime change has been in place since late August (the on going higher ATR levels) and it shows that a short term bottom might be in place (the blue circle showing the only significant decrease in the VIX's atr that we've seen this month).

So where is the market really at?  Probably in a big choppy range.  What am I looking for going forward?  I'm watching the zones in the SPY chart above..if we trade below the August/January lows, then we're probably going to see higher volatility and more of a sell off.  If we don't see new lows, then we'll probably drift up and down between the highs and lows of the zone until we clearly trade out of the zone.

Just note that active trading in a higher volatility environment is different than we've seen for several years.  Moves up and down reverse much faster and day to day follow through is limited.  While this presents great opportunities for nimble short term traders, it can be devastating for traders that are anticipating that their older trading patterns will still work.

Stay nimble and alert.

George

Markets Very Oversold: SPY is a short term Buy

My favorite short term over bought/over sold indicator is the 2 period RSI.  There have been papers, blog posts, books, etc. on the effectiveness of this indicator.  If you're not familiar with it, I would encourage you to google it and read up on the 2 period RSI.  Larry Connors has some great research on it.

As you can see from the chart below, the SPY etf is very oversold.  I'll be buying a little today and a little more tomorrow if we close down again.

Happy trading.

TLT

ThinkScript Indicator: CalmvVolatile

This is a pretty basic stud that compares the current Average True Range (ATR) with a long term average of the ATR.  The default periods are 14 period for the ATR and 500 period for the average.

This indicator can be helpful as a quick reference when taking short term trades.  If the instrument is volatile, you know that there's a better possibility of a quicker and farther move than if it's calm.  Enjoy.  The code is below.


#######Delete this line in TOS#############

input atrlength = 14;

input avglength = 500;

input plotlower = {default "yes", "no"};

def vol = AverageTrueRange(atrlength);

def avgvol = Average(vol, avglength);

def calm = vol < avgvol - (avgvol * .1);

def neutral = avgvol + (avgvol * .1) > vol > avgvol - (avgvol * .1);

def Volatile = vol > avgvol + (avgvol * .1);

AddLabel(yes, Concat("Market is Currently ", (if calm then "Calm" else if neutral then "Neutral" else if Volatile then "Volatile" else "Neutral")),  if calm then Color.GREEN else if neutral then Color.BLUE else if Volatile then Color.RED  else Color.GRAY);

declare lower;

plot window =  vol - avgvol;

window.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);

window.AssignValueColor(if Volatile then Color.RED else if calm then Color.GREEN else if neutral then Color.BLUE else Color.GRAY);

plot zeroline = 0;

######delete this line in TOS##############

Stock Market Still in an Uptend..despite what the financial news says

I think most traders and investors too, eventually realize that at a minimum, financial news needs to be taken with a grain of salt and more likely just needs to be ignored all together.  I've started seeing the bearish headlines and concerning stories pop up but when I pull up my charts, all I see is a nice trend that is taking a much needed breather.  Here's the S&P:

I believe Jesse Livermore said something to the effect of he learned to make big money by sitting on his hands..something like that.  What he meant was that timing every wiggle of the market is generally a losers game...the big money is finding a trend and then riding it until it's done.  As you can see from the chart above, my system says the trend is still up, so I'm staying long with stock..plain and simple.

On a separate note, I stumbled across this blog today http://share-tos.blogspot.com/.  It is filled with all sorts of ThinkorSwim codes that the authors share.  If you're into tos, it might behoove you to go spend some time at the blog..I know I will.

TLT

Leading Indicators Study Say's Bears are Still in Control

One indicator that I created a while back and have been following is called the "Leading Indicator Study."  No, these are not the economic data leading indicators, these are just different etfs of asset classes that represent the bullishness or bearishness of the market that tend to lead big moves.  It is based on the Euro (FXE), Copper (JJC), Small Caps (IWM), Emerging Markets (EEM), VIX (VIX or VXX), Long Term Treasuries (TLT), Short Term Treasuries (SHY) and Consumer Staples (XLP). 

I'm not going to go into exactly how this works, but I wanted to share the general idea...maybe it will spark some ideas with clever traders that look at such things to derive an edge.  The basic concept is to take risk sensitive asset classes, determine whether they are in an uptrend or downtrend, and then create a score based on the trends.  This particular indicator uses a couple of regression calculations to determine the trends and then it adds points for the bullish trends and subtracts points for the bearish.  Simple enough.  Regression is not necessary, you could easily use a moving average or volatility break out system in place of the regression.  The point is to look at multiple asset classes at the same time to get a heads up on what the market's current risk appetite is.

Here's a screen shot of the indicator paired with the S&P 500, note the colors of the price bars are indicative of the bullishness (green), bearishness(red), buycaution (yellow) and sellcaution(blue):

Hopefully you found this interesting and you can work out something similar or even better to implement with your own market analysis.  As you can see with the chart, price bars are red and the indicator score is a very low -92 which confirms the bearishness of the market.  That tells me not to get too excited about any rallies until this indicator gets back to bull territory.

TLT

Looking at the S&P Bar by Bar

We've had some interesting price action over the last week.  I've taken this dip as an opportunity to add some longs for both me and some clients.  This market will likely continue higher and it will be confusing to many retailers when they see this market making new highs despite all the negative news stories.  Here's a quick break down of recent price action in the S&P via SPY:

I've pointed out 3 interesting scenarios that have taken place within the last 7 trading days.  First there was a strong swing low last Friday, which looked like an excellent bullish reversal.  That was followed by a  big gap down on Monday that had a false break to new short term lows (15-20 day lows).  The interesting thing about Monday is that a bunch of stops were likely taken out and then the market closed pretty close to the highs for the day.  I'd imagine quite a few retailers lost some money on that move.  Tuesday, the bulls were definitely back in control and going long above Monday's highs was a great short term long setup.  Then today...we gapped way up to 6 day highs and didn't lose too much ground.

From my point of view, this type of price action is showing that bulls are still in control.  Every time the market looks like its setting up a shorting opportunity, the move gets faded as buyers hit the market.  The long and intermediate trends are both up and that's how I will trade until that changes.  Going short in this market is for suckers that like to pick tops (a skill that very few can successfully do) or major suckers that like to pick up nickels in front of a steam roller (sure you might make a few cents here and there but you're taking an enormous risk).  As always, this is just one person's opinion and I am wrong just like many others...I've just learned to cut my losses over the years and to hold on to winners when the current trade is acting "right." 

Outside of the market, it has been hectic lately.  Work is incredibly busy and my wife and I recently closed on a new home and moved about two weeks ago.  Unpacking always takes about 10 times longer than I think it will..eh, you guys know about that.  I guess I'm saying these things to explain why posting has been limited lately.  I have managed to read a couple of interesting books lately and I plan on posting a couple of reviews on them.  Maybe I'll have time this weekend. 

Hopefully everyone is off to a profitable start this week!  Keep your head up and stay alert..this is a crazy market.


TLT

SPY Entering Bearish Resistance Zone

 It will be interesting to see how the market reacts to the levels we're at.  So far, the resistance is holding.  Anytime the market repeatedly tests the same resistance point, it's like fuel for the fire that is building and all we need is a spark. 

Lately it has paid to be skeptical of such moves and fade them or to sit it out all together.  I'm personally waiting it out as far as equities are concerned.  There's a lot more interesting action going on in Bonds and Currencies right now..such as bonds are calling for stocks to sell off from the resistance but currencies are favoring a break out.  Who will win?  More importantly, how will you be able to tell when someone wins and then capitalize on it?  These are the questions you should be asking and incorporating into your current game plan.

TLT

So What's New with the Market?..not much

Prices have literally chopped back and forth for months now.  This has been a very difficult market environment for lots of traders and investors and I've not been an exception.  That being said, there are still plenty of people that are actually making money in this.  They are the ones who have adapted to the volatility and lack of follow through.  They are suspicious of any rally or sell off and  book profits quickly into momentum..something that's easier said than done.

Personally, I've found the swings in the currency market to be easier to track and trade than the stock market.  I am holding a couple of longs and will put on some shorts if this market breaks down but other than that, I'm letting the stock market play out and prove itself a little before I get committed to either side of the market.

Good luck out there.


TLT

Don't Fight the Tape

Well, my short position that I posted about was taken out when the resistance did not hold..this market is on a roll.  6 straight days of higher highs and higher lows.  Lots of traders got excited about the "Death Cross" and as it turns out, that was the point right after the short term lows that we have yet to see again.  What's the point?  The point is that if CNBC is talking about a major technical point, like the Death Cross, use caution. 

 Now I was short like lots of others, but not because of the Death Cross..I was short because my system was calling for shorting the market.  Now I'm out because the market is on a bull run and staying short through this action is merely fighting the tape..good luck with that.  What will be interesting is to see if we're still in a range bound market (likely) or if prices will continue to climb the wall of worry (2009 style).

I'll be traveling for the rest of the week and will return home next Monday.  Posting will resume then. 

Have a great week.


TLT

Bears Beware?

We saw a wicked rally yesterday and a substantial gap up this morning but, unfortunately for the bulls, prices plunged this afternoon.  That little rally was enough to inflict some pain on the shorts, me included, as I got to watch prices gap right through some of my stops and take me out of some positions that ultimately would have been great to have at the end of the day...kind of an insult to injury but that's part of the game.  

SPY Daily

 Technically, stocks still registered a higher high and a higher low, so there's still some hope for the bulls, but I think we're heading lower.  My indicators are calling for lower lows and fortunately, I've still got some shorts on the table...I got knocked out of my TZA (3X small cap bear) position but I'm still in the slightly tamer SDS (Ultra Short S&P). 

So should the Bears Beware?  Obviously, I don't think so and I've got my money where my mouth is.  That being said, there's always the chance of being wrong which is why using stops (even when you get whip sawed) and proper position sizing is so important.  The best trades tend to be at inflection points, where the market looks like it will go either way, because those are the spots that offer the best risk to reward.  The key is to have a reason (indicator, system, guru to follow, etc) that helps you determine which side to be on and  is right often enough to make money.  So my system is pointing down..we'll see how it plays out.

Hope everyone's having a great week so far.

TLT

Down, Down, Down, Down, and Up Just a Tad: Pretty Bearish Week

This week, the market literally pulled a 180 and made lower lows and lower highs every day this week. In fact, today was the only day that the S&P managed to close up and it was barely up. It did however close in the middle of it's daily range which shows a little bit of indecision but I'm gonna keep my shorts on (pun intended) for now. Here's a look at the SPY daily chart:
I think at a minimum the market will test the recent lows, approx. 104 for SPY, and if that support holds again we will continue to be range bound but in the mean time we can trade this market down. So why am I bearish again? Treasury spreads (here's a recent post that explains the treasury spread indicator), which have been spot on, are pointing lower. Here's an updated chart of where we stand according to the spreads:As you can see, spreads are making new lows which means that my money will be fading strength in the market. That is why my shorts will remain on the table. Now all of this could change and I'll be watching for more divergences but for now, the path of least resistance is down.

Have a great weekend.

TLT

A Look at the Big Picture: SPY Monthly Chart

About once every month or two I like to pull up the monthly chart of SPY with a MACD indicator attached to the chart. This helps me keep things in perspective and the MACD on the monthly chart does a good job of alerting you to potential changes in trend. Here's the chart:You can see on the above chart that the MACD never got above zero with this past year's rally...and now the distance between the signal line and the moving average is converging. These things are a very bearish indication to me but the market could go up.

The MACD is great for putting current price action in proper context but it does not tell you where price action is heading. This bearish looking MACD could turn very bullish if the market rallies for the next week or two. That being said, it still appears that the path of least resistance is down and that's the direction that I will continue to put money to work.

Have a great weekend.

TLT

Anemic Volume Today

It's no surprise that today was a range bound trading day with little opportunity, unless you were trading something that was stock specific like CSCO. Volume was well below average for most stocks and indexes. Here's how I track intra-day volume in order to get a clue as to it being a trend day or a range day, which is important to identify so that you have realistic expectations for follow through on trades.

I keep an excel spread sheet that I update daily. This spread sheet tracks the average for the prior 20 trading day's average volume, range and 14 period ATR (average true range) for each 15 minute period of the trading day on the S&P 500 index etf (SPY). Okay, that was a mouthful. This spreadsheet is useful because I can look at it and tell what the average volume for the prior 20 days on SPY between 10:00 and 10:15. For example, today's volume for that period was roughly 2.5 million shares. By itself that doesn't mean much to some people. Well, my spread sheet tells me that the average for that 15 minute period (10:00-10:15) for the past 20 trading days is 6.8 million. It doesn't take a market wizard to figure out that today's volume for that period was way below average.

I print this sheet out in the morning and leave blanks to hand write the SPY volumes for that trading day. This method works better than just a moving average on the volume below the chart because it compares apples to apples (or the same period of time to the same prior periods). Here's a screen shot of today's sheet:Maybe we'll see a little more follow through tomorrow..this chop can really put a dent in the P&L if you're not careful. The chop got me a little but fortunately I was catch some of the CSCO move this afternoon to put me in the green for the day.

Hope you all had a good start to the trading week.

TLT

The Lines Have Been Drawn

The bulls made a good showing today, but the bears hopped on the intra-day double top and shorted all the way down to the close. The increasing volume to the downside in today's action combined with the technical damage that we've seen on the higher time frames...in particular the daily...tells me that the short side will probably win. That being said, if the bulls manage to trap the bears, there could be a big rally as the bears get squeezed. With Obama giving his state of the union tomorrow, I'd be very cautious trading to the upside, but then again, I'm short and probably a little biased.

We'll see if tomorrow's trading can get us out of the range.

TLT

Today's Action: ZZZZZZZZZZZZZ

Wake me up when something happens. I must say that the consolidation is not a good sign for the bulls...lots of people were expecting a big move up after the sell off we saw last week. The good news for the bears is that the S&P was able to stay above Friday's lows, at least as of 2:30 central time as I'm writing this post. Here's an hourly of the SPY to illustrate my point:Fortunately, inside days like today provide tight consolidation that leads to a good move whenever a break out/down does occur. We'll just have to wait and see.

TLT

Trapping Traders: The Mid-Day (False) Move

Another day of earnings releases followed by selling in the market. Even in after hours today, Google sold off after releasing results. There was a lot of money to be made trading the short side this morning, at least for the first hour and a half of trading. After that initial move the markets merely chopped around and most likely chopped away a lot of day traders' profits from the morning.

A good example of why intra day traders get chopped up mid day occurred around 12 o'clock (central time) today. For this example we'll use the SPY index, but you can see this same kind of set up among several different indexes and stocks at various times through out the day. Around noon, the SPY finally looked like it was going to crack the lows of the day and head lower. I'm sure several traders were eager to add to their shorts or sell short again or even short for the first time because they missed the big move earlier in the day. SPY broke through the prior lows by 6 or 7 cents but then quickly retraced and continued heading higher for quite some time, which trapped traders and no doubt ate up some profits from earlier as traders had to cover their loser shorts.

So what caused this? Most likely, two things: 1) buy programs, and 2) professional traders. There are several algorithmic programs that are programmed to fade the highs and lows of the day, especially when the high/low occurs during the middle of the day when there's not a lot of volume. These programs are designed to trap short term traders and force them to exit their positions causing the stock to bottom/top and the program exits for a profit. Lots of professionals know about this because they've been doing the same thing for years, it's just that the algo trading has dramatically changed the moves, as they are much quicker and tend to last longer now.

Here's a 5 minute intra-day chart of SPY that illustrates what I'm talking about:So what can traders do to protect themselves from these kinds of traps? First, they can not be as aggressive to trade a breakout, especially when it occurs outside of peak hours in the market. They can also wait for confirmation. Notice that the new lows didn't even hold on the 5 minute chart above...just waiting for prices to close at the new levels would have kept you out of this trade. Another thing to do is to cut losses quickly. Set your uncle point and stick to it. Note that adapting to program trading is just part of trading these days and it forces traders to either cut losses quicker than before and wait for a re-entry or allow trades more room to breath and slowly build a position.

These intra-day high/low fades are funny to watch when your not in them, but they are awful when you're caught in one and you're not prepared to exit quickly. One last suggestion on how to deal with this is to examine your intra-day P&L levels. I've noticed that for the most part, my trading profits occur during the first hour and a half of the day and the last hour of the trading day. I tend to take mediocre trades and get chopped up in the middle of the day, unless there is something specific that is making the market move. Paying attention to your intra-day P&L will give you insights into what times you should be trading and what times you should not be trading.

I hope everyone is having a profitable week so far and is prepared for what will likely be a very interesting Friday tomorrow.

TLT

Market Overview

It's nearly Christmas and the markets have taken a slight pause today (some are up a little and others are down or flat). I thought it would be a good time to look over the markets in general and see where we stand. There's a lot of chatter about the annual santa claus rally, lets see what the markets say.

To kick it off, lets look at the S&P via SPY. As you can see from the chart below, the S&P has been stuck in a trading range since early November. The top of the channel has been tested several times in December but we still have not seen a meaningful break. I want to see it break and hold before getting too bullish on the market.

The recent break out in tech (qqqq) is good news for the bulls. Tech is looking incredibly strong and it will help move all the markets higher if it remains strong. I will be looking to enter a long position in either the nasdaq etf or the semi conductors (smh) if the S&P breaks out. Here's the chart for the Q's, note the break out:Okay, S&P is range bound, Q's are breaking out, what else should we be following for an indication...the small caps (IWM). The small caps have been the laggards lately but now they seem to be playing catch up. The Russell 2000 (IWM) is sitting (barely) at fresh highs which is another good indication for bulls. Here' s the chart:We'll go ahead and file the small caps under bullish for now, but this will change if it falls back into its prior range. Next lets take a glance at the VIX. The VIX has just fallen to some fresh lows and it actually closed below the 20 level yesterday...something that it hasn't done for some time. What does this mean? It means that worries are easing, at least for now. This is also a bullish sign for the short term outlook of the stock market.

So far, we have a neutral S&P that might break out (neutral), a breaking Nasdaq (bullish), a breaking Russell (bullish) and a falling VIX (bullish). That's 1 neutral and 3 bullish signs. Where's the case for the bears? Here it is, the financials.

Financials (XLF) have been a huge laggard and they will weigh down the S&P and the market in general if they don't perk up. Here' s the chart:There's the obstacle for bulls and fuel for bears. I don't know which way it will go and I'm certainly not smart enough to figure out how big of a mess the banks are (or are not) in. Furthermore, I can't even try to figure out the effects of the stimulus plan and whether that will provide enough cheap money to raise the market in general and make banks profitable, but there are lots of people out there that think the stimulus is merely going to provide profits to banks. I just watch the charts and try to determine which direction "order flow" is moving and then ride along.

One indication that can provide insight into whether banks will do well (and the economy in general) is the yield curve. The yield curve is currently steep, meaning short term rates are much lower than longer term rates. This is good for banks which in turn is good for the economy and markets in general. This is why the feds want the rates to remain low. Here are the current treasury rates and yield curve that are pulled straight off of Yahoo Finance's Bond Center. As you can see, longer term rates are much higher than short terms rates. This should help banks quite a bit and is indicative of good times ahead. However, there's always the concern that this time is different, especially considering that enormous stimulus plan and the worries of future inflation. We'll see how it plays out but for now I'm counting it as bullish.

So what else is there? The Dollar. The dollar has been in the headlines and has been talked about quite a bit lately. Most of the chatter has been about how bad the dollar is and that it's falling and going to lose half its value...blah, blah, blah. The dollar has actually been strong as of December and it appears that a reversal of some kind is under way. Here's the chart of UUP:Until recently, the dollar had shown an inverse correlation to the stock market, but that relationship seems to have changed as the dollar has been climbing with the market. I particularly like the long play in the dollar and I'm currently in it. One reason that I like it is that the dollar has been rising with stocks, but, the dollar also serves as a good flight to safety instrument that the world buys it when things start looking bad. Therefore, the dollar will likely keep rising in its current trend, and then if things get bad in the equities markets, the dollar will rally even harder. That's my current theory and like I said, I'm in this one.

Last but not least, Gold (gld). Gold has been on a bullish tear for quite some time, but now it seems to be falling back to earth. Why is gold a good short right now? Here's 3 reasons: 1) gold is likely in a bubble and bubbles break hard when they pop, 2) historically, gold has sharp climactic tops and long rounded bottoms and Dec. 3 sure looks like a climactic top to me, 3) the strong dollar will put pressure on gold prices. All of these things tell me that gold is a good (note not a sure thing) short right now and I'm currently in it. Here's the chart:Alright, here's a quick recap. The S&P is still range bound (neutral) and needs to break out, the Nasdaq is trending higher (bullish), the Russell is perking up and printing new highs (bullish), financials are lagging (bearish) but the yield curve is steep which makes it easier for banks to make money (bullish). The dollar is showing strength and gold is weak. These are neither bullish nor bearish (IMO) but they are very tradeable and I'm in both.

So what now? I'll be looking for a break out in the S&P with confirmation from small caps, financials and bonds (lower bonds). If this happens, I'll be looking to go long tech (QQQQ, XLK) and semi conductors (SMH) and short bonds (TBT). I'll also be adding to the long dollar position and the short gold position if they continue in my favor.

If the S&P doesn't break higher, watch out because we might see a substantial drop in the markets. For the bearish scenario, I'll be looking to short financials and emerging markets and look to go long utilities (xlu) and bonds (tlt). There's the game plan for the rest of the year and the beginning of 2010. We'll see how it plays out.

Have a merry Christmas and a happy new year!

TLT

The Market Continues to Chop

The chop fest continued this week as the major indexes, in particular the S&P 500, has failed make a meaningful move. We tested the highs of the range last week and briefly broke out but to no avail as the rally quickly sold off and the S&P retested the lows of the channel. Here's an hourly chart, note the choppy action of the wide volatility stops:Maybe we'll see a break one way or another next week...until then there's not much to do but to maybe fire off a few quick day trades and book profits pretty quickly. The swing trade in UTX got stopped out, barely, but out none the less. The only position that I'm currently holding is a trade in JNJ that I'm trailing a stop on. JNJ has had quite a run lately but who knows how much move is left...I'll let the market get me out.

As you can see, I haven't posted much in the past week or so. Mostly because there's not much to post but also because I've been incredibly busy with the law work. I'll be in court for a civil trial Monday and then will probably start posting more regularly after that. Hope everyone's had a good week.

TLT

Strong Market Today, Let's Take a Look At It

It's not too surprising that stocks are strong today as there were quite a few buy programs that hit the market in the last hour of trading yesterday. As of this writing, the SPY is up approximately 1.25% and IWM (small caps) is up 1.5%...which is significant because there has been a divergence between large cap and small caps lately. One notable divergence that is still in place today is with the financials (XLF) as it is down a little and not participating in the rally, making todays rally a little suspect. Here's a screen shot of my intra-day stock monitoring screen with the SPY and some annotations:As you can see, the SPY gapped up and is currnelty holding onto gains. It's currently in an uptrend on the 15 minute time frame, but there's some overhead resistance at the $111.75 level. We'll need to see that level taken out and for it to hold in order for the SPY to see higher highs...otherwise it will just continue to chop around in that 111.75-109 range that it's currently stuck in.

At the beginning of this post I mentioned buy programs...some might wonder what this means. I (along with most other traders) monitor the NYSE tick index or the TICK for short. Various people state that certain levels are important, such as 800, 1000 or 1250 and the corresponding negatives of these values. Others monitor an average of the values and watch that to see if there's more buying or selling. Personally, I just keep track of the number of readings above 1000 and below -1000 and I note if there are several readings that are close but not quite at these levels. I also keep an eye on the 20 and 50 period moving averages on the 5 min chart to look for consistent buying or sellling.

For example, lets look at today's 5 minute tick chart:There have been 6 readings of 1000 or more on the tick and there has not been a single reading at or below -1000, although there were a few close readings around -900. In fact, the majority of this morning's tick reading were positive as indicated by positive 20 and 50 period moving average readings. What does this mean? It means that buy programs have been hitting the market and the significance of this is that the big boys are trading to the upside, at least for now. This tells me to only trade to the upside and to let profits run because the trend is likely to continue...as opposed to a choppier day evidenced by extreme tick readings in both the positive and the negative that would warrant taking profits quickly.

This is how I follow and look at the TICK chart. Note that there are several interpretations on how to use and read the tick chart. Furthermore, this post has not gone into very much depth about the tick and it assumes that you are at least familiar with it. The tick index is merely the number of stocks on the NYSE that are trading on an up tick vs. the stocks trading on a downtick. If you're not familiar with the tick index and want to learn more, a good place to start for learning about the TICK index is Investopedia with this and then read some of the links as well.

Have a profitable trading day!

TLT