Saturday, December 31, 2011

Analyzing the Stock Market and Equity Futures 12/31/11

I like watching the 1 Minute chart of the ES Futures. It helps me judge market strength when it is testing extremes.


Yesterday, the market tested the previous day's high just after 1000 ET. A strong move typically involves the $TICK hitting + or - 800 and the $TIKI hitting + or - 24. In this case, as the market tested the previous day's high, the $TICK was well below +800 and the $TIKI was well below +24. A rather weak effort, and the result was a down trend for the rest of the day. There just wasn't any major buying programs in the market to push it higher.


The $TRIN closing at extremes on its daily chart is an interesting study. Sometimes extreme market moves signal a short term exhaustion in its current trending direction. When the $TRIN closes above 2 on an extremely bearish day, the next day may see a rally to the upside. Likewise, when the $TRIN closes below 0.6 on an extremely bullish day, the next day may tumble to the downside a little.

I looked at a small market sample to test this assumption. In this sample, the $TRIN closed above 2.0 - 15 times, and it close below 0.6 - 13 times. When it closed above 2.0, the next day was bullish 60% of the time. When it closed below 0.6, the next day was bearish 54% of the time. Not something that you want to bet the farm on, but something to be aware of when this happens.

The last chart is the Pivot lines for Tuesday, 1/03/12.


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