Survey Says

As a budding trader, one of my goals has been to study market breadth from different perspectives to better pinpoint trading zones. Through numerous posts I've delved into various methodologies and measures to get a pulse on what the market is currently doing. With each study I've become better informed of the merits, nuances, pluses and minuses of these various indicators. At some point however it becomes important to take ownership of them and make them my own.

Having analyzed my trades and journals over the past month, I've increased my awareness of my trading style and the periods where I've had success and the periods where I've broken form. As I further clarify and hone in on my style and the strategy and tactics I will begin to execute, I've also filtered various market breadth tools through these methods to create a more cohesive model. My focus is locating periods of confluence between these indicators suggesting the market is healthy enough to take action.

Looking at the market this week I see absolutely no reason to be involved in trading what-so-ever. The indicators I use are showing confluence –to the downside. As a trader of momentum based swing techniques, the primary vehicle selection I use is small cap stocks. Considering this, the index that is of primary significance to me is the Russell 2000 as this indicates not only the over all health of the small caps, but also is construed as an indicator of a risk averse or risk taking market. A look at this index using stage analysis clearly indicates Stage 4 is in progress as price is below a declining 30 week moving average.

Russell 2000 Stage 4

Next, looking at a graph of the Primary and Secondary indicators of the Market Monitor, there is a jagged down trend on the Primary, and a cascading downward slope on the Secondary. As the Secondary is a measure of stocks moving over the past 34 days and with this bounce commencing 34 days ago, there is a high probability that this indicator will go bearish this upcoming week and if so, the Primary moving bearish is likely to follow.

Market Monitor Primary

Market Monitor Secondary

The 5 day NH/NL has continued to decline since peaking on 10/28. A decrease of highs suggest there are not participants willing to buy dearer, so it makes little sense to buy if I won't be able to find sellers later.

$USHL5 11/18/11

One last technical indicator I will be using from this time forward is the $BPNYA, which currently flashed “Bull Correction.”

$BPNYA 11/18/11

Given that the market moves of 1%+/- are the norm, the current market is acting quite “emotional.” As I've come to understand with greater clarity, emotional states can lead to unexpected outcomes.  This chop is not the environment that I choose to trade and given my current read of the indicators I'm using, the market is not in cadence with my methods and as such sitting on the sidelines is in my best interest until they begin to firm.