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SPX Commitments of Traders (Combo)
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with net positions of commercials in the standard S&P and contract AND e-mini S&P contract.
This produces an overall look at commercial activity in the S&P, with mini positions correctly weighted at one-fifth the size of the standard contract.
UPDATED WEEKLY
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E-Mini S&P Commitments of Traders
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with the net position of commercial and large trader positions in E-Mini S&P futures. With E-Minis rapidly taking market share away from their larger pit-traded counterparts, it's becoming increasingly important to monitor the activity in the Minis. Pay particularly close attention to the action of the 'large traders' in the Minis, as this reflects the activity of the increasingly dominant hedge fund universe. These so-called 'large traders' are typically on the opposite side of the market, short during bullish phases and long during bearish phases.
UPDATED WEEKLY
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NDX Commitments of Traders (Combo)
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Current chart (Large Version)
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Long-term Chart
Chart: Nasdaq100 with net positions of commercials in the standard Nasdaq contract AND e-mini Nasdaq contract.
This produces an overall look at commercial activity in the NDX, with mini positions correctly weighted at one-fifth the size of the standard contract.
UPDATED WEEKLY
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E-Mini NDX Commitments of Traders
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Current chart (Large Version) |
Long-term Chart
Chart: Nasdaq100 with the net position of commercial and large trader positions in E-Mini Nasdaq futures. With E-Minis rapidly taking market share away from their larger pit-traded counterparts, it's becoming increasingly important to monitor the activity in the Minis.
UPDATED WEEKLY
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RUT Commitments of Traders (Combo)
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Current chart (Large Version)
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Long-term Chart
Chart: Russell 2000 with net positions of commercials in the standard Russell contract AND e-mini Russell contract.
This produces an overall look at commercial activity in the Russell, with mini positions correctly weighted at one-fifth the size of the standard contract.
UPDATED WEEKLY
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E-Mini RUT Commitments of Traders
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Current chart (Large Version) |
Long-term Chart
Chart: Russell 2000 with the net position of commercial and large trader positions in E-Mini Russell futures. With E-Minis rapidly taking market share away from their larger pit-traded counterparts, it's becoming increasingly important to monitor the activity in the Minis.
UPDATED WEEKLY
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Last Hour Indicator
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Current chart (Large Version)
| Long-term Chart
Chart: Dow Industrials with the Last Hour indicator. Last hour measures the price change in the final hour of each day's trading session and compares it to the price change in the first hour of trading. A positive number indicates the Dow's final hour outperformed the first hour, while a negative number indicates the final hour was weaker than the first hour. The indicator keeps a running summation of each day's final number and plots it on a cumulative basis in order to disply the underlying trend of last hour vs. first hour performance. When the last hour is consistently stronger than the first hour, shown by a consistently rising line on the chart, it's a sign of accumulation by 'smart money', while a falling line indicates 'distribution'.
UPDATED DAILY
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NYSE Program Trading Activity
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 with the percentage of weekly program trading activity for member firms own accounts.
Program trading involves the computerized buying and selling of large baskets of stocks, and can be
used by institutions to temporarily extend a move in either direction when it may ordinarily lose momentum.
A reading over 40% indicates an unusually heavy amount of program trading is in effect.
UPDATED WEEKLY
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Specialist Short Ratio
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with specialist short ratio. Ratio of specialist short sales to total short sales.
A rising ratio indicates specialists are accumulating short positions and is a bearish indication. Keep an
eye out for readings over 50% as it indicates specialists are heavily short, generally a good sign of a
long-term top in the market. Likewise, readings under 35% are a sign that specialists are holding relatively
few shorts, a longer-term bullish indication. UPDATED WEEKLY
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Public Short Ratio
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with public short ratio. Ratio of public short sales to total short sales.
A rising ratio indicates the public is accumulating short positions.
Readings over 50% indicate that the public is holding more than half of all outstanding shorts, and from a
contrarion standpoint is longer-term bullish.
UPDATED WEEKLY
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Odd Lot Short Ratio
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with the Odd Lot Short Ratio (OLSR). The OLSR is a ratio of odd-lot short transactions divided by all odd-lot transactions. An odd-lot is a trade for less than 100 shares and reflects the activity of the smallest investors. These investors are typically poor market timers, and we can use this to our advantage. When the Odd Lot Short Ratio exceeds 10%, it signals that these small investors have an unusually pessimistic outlook on the stock market, and in the majority of cases the market will head higher within the next couple of weeks.
UPDATED WEEKLY
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Investors Intelligence Bullish/Bearish Consensus
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with Investors Intelligence Bullish/Bearish Consensus. Investors Intelligence is a survey of 140 financial newsletter writers that is taken weekly by Michael Burke and his group. It is often viewed as a contrarian indicator, i.e., a high bullish reading may mean rough sledding ahead; a high # of bears may signal that we are near a market bottom. In recent times, this sentiment survey has been misleading in terms of its
implications for market timing, so use with caution.
UPDATED WEEKLY
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Market Vane Bullish Consensus
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Current chart (Large Version)
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Long-term Chart
Chart: S&P500 with Market Vane Bullish Consensus. Tracks the trading recommendations of commodity
trading advisors (CTAs) to gauge sentiment in S&P500 futures. Keep an eye out for
consistent readings above 50%, as it signals a majority of CTAs are bullish on stocks, typically
a good sign for the market as long as this remains in effect.
UPDATED WEEKLY
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American Association of Individual Investors Bullish/Bearish Consensus
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Current chart (Large Version)
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Long-term Chart
Chart: S&P500 with AAII Bullish/Bearish
Consensus. AAII compiles small investor sentiment readings on a weekly basis.
Bearish Consensus readings above 40%
signal an overly pessimistic outlook among small investors and from a contrarion standpoint is
longer-term bullish.
UPDATED WEEKLY
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VIX (S&P500 Volatility Index) & Bollinger Bands
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 (SPX) with Volatility Index (VIX) & Bollinger Bands. VIX
is the average implied volatility of SPX options and has an inverse
relationship with the stock market.
Unlike a stock, index or futures contract, volatility
is confined to an upper and lower range and will
not continue trending in one direction.
When the VIX closes 2 standard deviations above or below the recent average,
volatility is statistically 'out of bounds' and will most likely reverse in short order.
A VIX expected to reverse to the
downside should lead to a market rally, while a VIX expected to move higher
should lead to a downturn in the market.
UPDATED DAILY |
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VXO (S&P100 Volatility Index) & Bollinger Bands
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Current chart (Large Version)
| Long-term Chart
Chart: S&P100 (OEX) with OEX Volatility (VXO). Description
is the same as the VIX (see above) except VXO is based on the average implied volatility of OEX options rather than SPX options.
UPDATED DAILY
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VXN (Nasdaq100 Volatility Index) & Bollinger Bands
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Current chart (Large Version)
| Long-term Chart
Chart: Nasdaq100 (NDX) with Nasdaq Volatility (VXN). Description
is the same as the VIX (see above) except VXN is based on the average implied volatility of NDX options rather than SPX options.
UPDATED DAILY
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DAX Volatility Index & Bollinger Bands
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Current chart (Large Version)
| Long-term Chart
Chart: Germany's DAX 30 with DAX Volatility (VDAX). Description
is the same as the VIX & VXN (see above) except VDAX is based on the average implied volatility of DAX options rather than SPX or NDX options. UPDATED DAILY
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NYSE Arms Index (TRIN) & 21day Moving Average
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Current chart (Large Version
| Long-term Chart
Chart: S&P500 with NYSE Arms Index (TRIN). The Index shows whether volume is flowing into advancing or declining stocks. If more volume is associated with advancing stocks, the Arms Index will be less than 1.0; if more volume is associated with declining stocks, the Index will be greater than 1.0. Keep an eye out for readings greater than 2.0, as it signals potentially climactic selling pressure. Chart also includes a 20 day moving average of the TRIN. When the average falls below 1.0, it can signal the onset of a longer-term uptrend in the stock market until the average rises above 1.25.
UPDATED DAILY
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NASDAQ Arms Index (TRIN) & 21day Moving Average
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Current chart (Large Version)
| Long-term Chart
Chart: NASDAQ100 with NASDAQ Arms Index (TRIN). Description is the same as the NYSE Arms Index above, except based on NASDAQ stocks. Keep an eye out for readings greater than 3.0, as it signals potentially climactic selling pressure. Also note instances when the NASDAQ Arms closes at .25 or lower, as it signals a blowoff rally that's generally followed by a short-term selloff.
Chart also includes a 20-day simple moving average of the TRIN. The moving average generally oscillates between 1.30 (indicating an oversold market) and 0.70 (indicating an overbought market).
UPDATED DAILY
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NYSE Advance/Decline Ratio
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Current chart (Large Version
| Long-term Chart
Chart: S&P500 with the ratio of advancing issues to declining issues on the NYSE. Useful for keeping tabs
on the overall breadth of the market. One particularly interesting setup to watch for is a ratio greater than 3.0, meaning
advancers crushed decliners by better than 3:1. Such activity is typically bullish for the short-term. Also watch
for the moving average to rise above 2.0, which is intermediate-term bullish for the stock market as it indicates persistently positive breadth.
UPDATED DAILY
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NASDAQ Advance/Decline Ratio
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Current chart (Large Version)
| Long-term Chart
Chart: NASDAQ100 with the ratio of advancing issues to declining issues on the NASDAQ exchange. Useful for keeping tabs
on the overall breadth of the market. When Nasdaq breadth comes in better than 2:1 in favor of advancers, the Nasdaq typically trades flat-to-down the next session as buying pressure is exhausted for the short-term.
UPDATED DAILY
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NYSE Total Volume
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 with the total daily volume on the NYSE. Useful for keeping track of the overall activity in the marketplace. One setup to watch for involves a move in one direction that comes on successively lighter volume for three days running. Such activity suggests less and less participation and often precedes a short-term reversal of trend. Similarly, three consecutive days of increasing volume during a steady move in one direction implies increasing institutional participation and indicates a continuation of the trend is likely.
UPDATED DAILY
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NASDAQ Total Volume
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Current chart (Large Version)
| Long-term Chart
Chart: NASDAQ100 with the total daily volume on the NASDAQ exchange. Useful for keeping track of the overall activity in the marketplace. See NYSE Volume description above for more information.
UPDATED DAILY
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S&P500 Put/Call Ratio
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 with S&P Put/Call Ratio. The put/call ratio divides total put volume by total call volume. S&P index options are heavily traded by institutions and are therefore particularly interesting to monitor for unusual activity.
UPDATED DAILY
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S&P100 (OEX) Put/Call Ratio
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Current chart (Large Version)
| Long-term Chart
Chart: S&P100 with OEX Put/Call Ratio. The put/call ratio divides total put volume by total call volume.
UPDATED DAILY
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QQQ (Nasdaq100 Tracking Stock) Put/Call Ratio
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Current chart (Large Version)
| Long-term Chart
Chart: QQQ with QQQ (NDX tracking stock) Put/Call Ratio. The put/call ratio divides total put volume by total call volume. It appears that one would want to keep tabs on the overall trend of the put/call ratio via the moving average (seen on the chart). A put/call ratio moving average above 1.25 is bullish for the Nasdaq as it indicates a healthy amount of hedging activity among institutional traders, while an average below 0.75 is bearish given the lack of meaningful hedging activity.
UPDATED DAILY
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Equity Put/Call Ratio
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 with the Equity put/call ratio. This ratio divides all stock option put volume on the CBOE by all stock option call volume. Watch the overall trend of the equity ratio by monitoring the moving average seen on the charts. A moving average above .80 signals an unusual amount of fear among small investors and can often signal an intermediate-term bottom is in the works. Also pay attention when the ratio hits an extreme reading. On the upside, any daily reading over .90 indicates an extraordinary amount of fear, and can relate to a short-term bottom in the market. On the downside, any daily reading of .35 or under indicates a complete lack of fear, and often relates to a short-term top in the market.
UPDATED DAILY
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TRIN5 (NYSE)
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 with the TRIN5 indicator for the NYSE. TRIN5 is simply the summation of the last five days closing TRIN values (also known as the Arms Index). When the TRIN5 rises above 6.0, it's indicative of a technically oversold market given the long string of high TRIN readings. This generally ushers in a period of lower TRIN readings coinciding with a rally in stocks. Similarly, when the TRIN5 drops below 4.0, it's indicative of a technically overbought market given the long strong of low TRIN readings. Generally this indicates that a period of higher TRINs is forthcoming, coinciding with a correction in the stock market.
UPDATED DAILY
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TRIN5 (NASDAQ)
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Current chart (Large Version)
| Long-term Chart
Chart: NASDAQ100 with the TRIN5 indicator for the NASDAQ Stock Exchange. TRIN5 is the summation of the last five days closing TRIN values (also known as the Arms Index). When the NASDAQ TRIN5 rises above 7.0, it's indicative of a technically oversold market given the long string of high TRIN readings. This generally ushers in a period of lower TRIN readings coinciding with a rally in stocks. Similarly, when the NASDAQ TRIN5 drops below 3.0, it's indicative of a technically overbought market given the long strong of low TRIN readings. Generally this indicates that a period of higher TRINs is forthcoming, coinciding with a correction in the stock market.
UPDATED DAILY
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S&P Futures Open Interest
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 Futures with Daily Open Interest. Rising open interest indicates new positions are being initiated, while falling open interest indicates positions are being closed out. Pay particular attention to times when open interest is falling - whichever direction price moves in this period of time is suspect.
UPDATED DAILY
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Nasdaq Futures Open Interest
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Current chart (Large Version)
| Long-term Chart
Chart: Nasdaq100 Futures with Daily Open Interest. A drop of 5% or more in Nasdaq open interest (excluding expiration periods) is typically a bearish indication for the next week or so. See S&P Futures Open Interest description above for more information. UPDATED DAILY
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Cumulative NYSE TICK
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 with the NYSE Cumulative TICK. A running total of 1-minute NYSE TICK readings are taken from open to close each day - the final number of the day is the closing Cumulative TICK. Keep an eye on the overall trend of the Cumulative TICK as represented by the 20 day moving average (see chart). A rising moving average indicates bullish tape action and should coincide with rising prices, while a falling average indicates bearish tape action and dropping prices. Note that the 20 day TICK moving average has very little lag time compared with price, indicating that the raw Cumulative TICK is actually a leading indicator.
UPDATED DAILY
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Cumulative NASDAQ TICK
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Current chart (Large Version)
| Long-term Chart
Chart: NASDAQ100 with the NASDAQ Cumulative TICK. See NYSE Cumulative TICK description above for more information.
UPDATED DAILY
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McClellan Oscillator (NYSE)
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Current chart (Large Version)
| Long-term chart
Chart: S&P500 w/ the NYSE McClellan Oscillator. The McClellan is a breadth-based indicator that takes the difference between a 39 and 19 day exponential moving average of the net differential of NYSE advancing issues minus declining issues. Generally the McClellan moves between +150 and -150. Two bullish setups to watch for: A reading above +150, which signals an unusually heavy amount of buying interest, and a reading below -200, which signals a technically oversold market.
UPDATED DAILY
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McClellan Oscillator (NASDAQ)
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Current chart (Large Version)
| Long-term Chart
Chart: Nasdaq100 w/ the NASDAQ McClellan Oscillator. The McClellan is a breadth-based indicator that takes the difference between a 39 and 19 day exponential moving average of the net differential of NASDAQ advancing issues minus declining issues. Generally the McClellan moves between +150 and -150.
UPDATED DAILY
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McClellan Summation Index (NASDAQ)
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Current chart (Large Version)
| Long-term Chart
Chart: Nasdaq100 w/ the NASDAQ McClellan Summation Index. The Summation is a long-term version of the McClellan Oscillator and is more suited to major trend reversals. It's calculated by simply keeping a running total of the Nasdaq McClellan Oscillator. A rising Summation indicates the overall breadth trend is bullish, which should correspond with generally rising prices, while a falling Summation indicates a negative breadth trend and generally coincides with a steadily falling market.
UPDATED DAILY
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McClellan Summation Index (NYSE)
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 w/ the NYSE McClellan Summation Index. See Nasdaq Summation Index description above for more information.
UPDATED DAILY
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QQQ Open Interest Spread
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Current chart (Large Version)
| Long-term Chart
Chart: QQQ (Nasdaq100 tracking stock) with the QQQ Option Open Interest Spread. The formula for the spread is (Percentage change in QQQ put open interest) - (Percentage change in QQQ call open interest), which is charted on a cumulative basis to show the underlying trend. A steadily rising line indicates that put open interest is outpacing call open interest, a bullish indication. In a healthy bull market, there will be much more interest in puts than calls. If the line is making lower lows, it means there's greater interest on the call side, a bearish indication.
UPDATED DAILY
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Bradley Siderograph
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Current chart (Large Version)
| Long-term Chart
Chart: Dow Industrials overlaid with the Bradley Siderograph. The Bradley Siderograph was originally developed by Donald Bradley in the 1940's, and is a means of combining all of the planetary aspects occuring at any given time into a single number through a complex series of weights and measures. For details on its construction, and to access current and historical data on the Bradley, please see this link.
UPDATED DAILY
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S&P500 with the ADX
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 with the ADX (Directional Movement Index). ADX measures the strength of the underlying trend. The higher the reading, the stronger the trend. Typically, a market is considered in a strong trend when the ADX exceeds 30. One particularly interesting setup involves watching for instances when the ADX exceeds 45 during an upward trending market. Such activity suggests an unusually strong uptrend is in process, and is an intermediate-term bullish indication.
UPDATED DAILY
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Nasdaq100 with the 5-bar RSI
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Current chart (Large Version)
| Long-term Chart
Chart: Nasdaq100 with the 5-day RSI (Relative Strength Index). The RSI is an overbought/oversold oscillator that ranges from 0-100. The 5-day version of this indicator does a good job at pinpointing short-term tops and bottoms in the Nasdaq, with extreme readings (above 80/below 20) often indicating a short-term reversal in trend. Also worth noting is three consecutive days below 25 has historically been a strong short-term buying opportunity, even during the bear market of 2000-2002.
UPDATED DAILY
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Long-term S&P Logarithmic Chart
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Long-term chart (Large Version)
Chart: Logarithmic chart of the S&P500 stretching back to the 1930's. Notice that the upward sloping channel
that contained the stock market's ascent for nearly sixty years was broken to the upside in 1995. This may have marked
the beginning of the equity bubble sooner than many realize, and it's interesting to note that the upper
end of the channel has turned into support, suggesting we remain in the same bubble nearly ten years later. When
the market trades back into the channel is anyone's guess, but until it does the bubble hasn't truly popped.
UPDATED WEEKLY
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NYSE New Highs, New Lows
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Current chart (Large Version)
| Long-term Chart
Chart: S&P500 with the number of new 52-week highs and lows on the NYSE.
Watch for spikes of over 500+ new 52-week lows as a sign of an intermediate-term bottom in the stock market.
Also be on alert for multiple days of over 400+ new 52-week highs, as this pattern generally precedes
a sideways to up stock market over the next 6-9 months.
UPDATED DAILY
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NASDAQ New Highs, New Lows
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Current chart (Large Version)
| Long-term Chart
Chart: Nasdaq100 (NDX) with the number of new 52-week highs and lows on the NASDAQ exchange.
See NYSE New Highs/Lows description above for more information.
UPDATED DAILY
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NYSE Up/Down Volume Averages
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Current chart (Large Version)
| Long-term Chart
Chart: Two 20-day moving averages, one of advancing volume on the NYSE and one of declining volume. 'Advancing volume' is total volume of all stocks that advanced on the NYSE, while 'declining volume' relates to volume of all stocks that declined on the NYSE. By monitoring the 20-day moving averages, one can see overall volume trends that may not be apparent from the daily activity.
UPDATED DAILY
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Equal Weighted S&P500 vs. Standard S&P500
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Current chart (Large Version)
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Long-term Chart
Chart: Equal Weight S&P500 charted on the same scale as the standard S&P500. Unlike the standard S&P500, which is a market-cap weighted index, the Equal Weight S&P assigns a fixed 0.2% weighting to all 500 stocks in the S&P, providing a much more broad-based view of the overall stock market than the large-cap dominated S&P500.
UPDATED DAILY
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OEX Open Interest
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Current chart (Large Version)
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Long-term Chart
Chart: S&P100 (OEX) with a chart of OEX Open Interest. The chart depicts the raw difference of call open interest minus put open interest. In a healthy bull market, the spread will be consistently below the zero level and falling, as investors hedge their buying with puts. It's when this spread rises above zero that a red flag is raised, as it reflects a lack of hedging activity, and therefore a lack of meaningful buying.
UPDATED DAILY
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Put/Call Open Interest Ratio for Index Options
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Current chart (Large Version)
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Long-term Chart
Chart: S&P500 with the put/call open interest ratio for index options. Institutional investors dominate the field of index options, so by monitoring the open interest ratio we can better gauge institutional sentiment. When the ratio is high (above 1.20), it signals a healthy amount of hedging (put interest), indicating institutions are putting money to work in the underlying index. It's when this ratio falls below 1.20 that a red flag is raised, as the lack of hedging reflects a lack of buying.
UPDATED DAILY
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Nasdaq/NYSE Volume Ratio
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Current chart (Large Version)
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Long-term Chart
Chart: Nasdaq100 with the Nasdaq/NYSE Volume Ratio, which is simply total Nasdaq Volume divided by total NYSE Volume.
This chart provides insight into the speculative nature of the market. Nasdaq volume is dominated by speculators while big board volume is dominated by professionals. When Nasdaq volume runs well ahead of NYSE volume on a consistent basis (as seen by a NASDAQ/NYSE Volume Ratio moving average above 1.50), it raises a red flag as speculators are unusually active, which often appears near significant topping periods in the stock market. Conversely, when speculative volume is running low (as seen by a Volume Ratio below 1.50), it's a positive sign for the market as professional investors are accounting for a larger share of total market volume. This type of action is often seen during bullish phases for the stock market. This concept can also be applied on a very short-term basis as well.
UPDATED DAILY
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Total Short Interest
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Current chart (Large Version)
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Long-term Chart
Chart: S&P500 with total short interest across all exchanges. Short interest refers to all open short positions, which generally rises over the long haul in conjunction with the general trend of increasing volume. However, it's worth noting those times when short interest falls into a pattern of 'lower lows', as this signals a marked decrease in shorts. Because institutional investors account for the bulk of short selling, a drop in short interest is typically a longer-term bullish indication for the stock market.
UPDATED MONTHLY
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Philadelphia Bank Index vs. the Dow Industrials
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Long-term Chart
Chart: Philly Bank Index (BKX) with the Dow Industrials. The banking sector is arguably the most significant single sector affecting the overall stock market. By comparing the long-term performance of the Philadelphia Bank Index (BKX) and the Dow Industrials, we find that the BKX can often provide telling clues in terms of forthcoming moves in the Dow. Note that by 1999, the Bank Index was already showing signs of weakness, falling into a trading range that would ultimately last another three years. This was a warning sign that the push higher by the Dow in '99 and early '00 might be unsustainable. Similarly, during 2001 and particularly 2002, the Bank Index held within its long-term trading range while the Dow was breaking down, signaling that the breakdown could represent a longer-term buying opportunity as long as banks held firm. More recently, the Bank Index has clearly broken out of its long-term trading range to the upside while the Dow is lagging behind. From a long-term perspective, this is a positive indication and suggests the Dow Industrials have some catching-up to do on the upside.
UPDATED DAILY
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Philadelphia Semiconductor Index (SOX) vs. the Nasdaq100 (NDX)
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Long-term Chart
Chart: Philly Semiconductor Index (SOX) with the Nasdaq100. The chip sector is arguably the most significant single sector affecting the Nasdaq. While the two indexes are highly correlated and generally move in tandem, be on the lookout for divergences, such as when the SOX fails to confirm a move by the Nasdaq. These divergences are often an early clue that the move may not be sustainable. UPDATED DAILY
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Dow Utilities vs. Dow Industrials
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Long-term Chart
Chart: Dow Utilities with the Dow Industrials. Utility stocks have a good track record at signaling the potential for longer-term weakness in the Dow Industrials. The Dow Utilities Index has
exhibited noticeable weakness prior to nearly every major selloff in the Dow
Industrials over the last two decades (by noticeable weakness, I mean the
Utilities Index hit at least a nine-month low.) This 'tell' occurred prior to
the '87 market crash, prior to the weakness in 1990, prior to the weakness in
'94, prior to the mini-crash of '98, prior to the weakness in 2000, and most
notably prior to the selloff in 2001-2002. In each of these cases, the Dow
Utilities Index gave advance warning of trouble in the Dow Industrials by
hitting its lowest level of the past nine months.
UPDATED DAILY
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Linear Regression Slope & R-Squared
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with 14-day Linear Regression Slope and R-Squared.
Linear Regression is a statistical tool that utilizes what's known as the 'least squares' method to plot a straight line through price. Similar to a moving average, the linear regression line is often used to better understand the underlying trend. Unlike a moving average, however, Linear Regression does not exhibit as much delay. Since the indicator is "fitting" a line to the data points rather than averaging them, the Linear Regression line is more responsive to price changes.
This chart highlights two important technical indicators based on the linear regression technique - R-Squared and Linear Regression Slope. Slope tells you which direction the linear regression line is pointing (above zero is bullish, below zero is bearish), while R-Squared attempts to quantify the strength of the trend. Specifically, r-squared values show the percentage of movement that can be explained by linear regression. For example, if the r-squared indicator is currently at 70%, it means that 70% of the movement of the S&P500 can be explained by linear regression. The other 30% would be considered random noise.
UPDATED DAILY
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QQQQ Customer/Market Maker Ratio
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Current chart (Large Version) |
Long-term Chart
Chart: Nasdaq100 with the QQQQ Customer/Market Maker Ratio
One of the more interesting aspects of the PutCallWatch data is that daily options volume
is broken down into three categories - customer, market maker and firm.
'Customer' is a fairly broad category encompassing a wide variety of
investors, from individuals to hedge funds. Any non-member firm would thus be
considered a 'customer'. It's unusual to gain insight into the relationship between customers and
market makers, yet that's exactly what this data provides. One indicator that illustrates
this relationship is the customer/market maker
ratio. The indicator is calculated by taking the daily volume attributable to
customers and dividing it by the volume attributable to market makers. A
reading over 1.0 indicates customers were responsible for more of the day's
volume than market makers, while a reading below 1.0 indicates the day's
trading was dominated by market makers. For longer-term analysis, we prefer to focus on the 20-day moving
average of the customer/market maker ratio (seen in red on the chart.)
A quick study of the long-term chart reveals a fairly clear message.
Customer participation is a necessary ingredient to produce a sustainable
rally. When customers are noticeably absent, and market makers are mostly
trading among themselves, it's a bearish sign. But when customers are actively
involved, it's generally a positive indication.
UPDATED DAILY
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NYSE Cumulative Breadth
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with Cumulative Breadth (advancing issues minus declining issues).
Cumulative Breadth is calculated on a daily basis by first subtracting declining issues on the NYSE from advancing issues. The result is then normalized by dividing the result by the total of (advancing issues + declining issues). It's necessary to normalize the daily reading so that readings from twenty years ago, when there were far fewer issues trading on the NYSE, can be compared to current readings. Once we calculate the day's normalized reading, we keep a running summation by adding today's reading to the prior day's reading. We often discuss the fact that breadth can be a lead indicator on a short-term basis, and this indicator reveals that breadth can also be a lead indicator on a long-term basis. It appears particularly good at signaling longer-term tops in the stock market, as it tends to top out and begin heading lower by upwards of a year before the market itself puts in its ultimate top.
UPDATED DAILY
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NYSE TICKscore
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with NYSE TICKscore, an indicator based on a unique scoring system for intraday TICK readings.
TICKscore is an integral part of our intraday trend catcher strategy.
The final day's reading, when charted cumulatively, also provides a good overall snapshot of how the TICK is trading on a daily basis. Just as NYSE breadth, when charted on a cumulative basis, provides telling clues regarding the market's underlying health (or lack thereof), the same can be said of the cumulative TICKscore. A rising TICKscore reflects the fact that the TICK is registering more positive extremes than negative extremes, and hence reflects better buying pressure beneath the surface.
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NYSE Cumulative Adjusted TICK
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with NYSE Cumulative Adjusted TICK, developed by Brett Steenbarger. Charts shows both the raw daily number as well as a cumulative version. First, a quick definition of the TICK, courtesy of an article written by Brett for
TradingMarkets.com... "The TICK is displayed by most
real-time quote vendors as $TICK, and it measures the number of NYSE issues
trading on upticks vs. the number trading on downticks. This is sometimes
described by technicians as an overbought/oversold index, but that is
misleading. It is better to think of the TICK as a sentiment measure, because
it is assessing the willingness of market participants to facilitate trade
either at the offer price (meaning that buyers are willing to pay up to own
the stock) or at the bid (suggesting that sellers will give up the edge to get
out of the market). By tracking where the TICK is trading relative to its mean
value (what I call the Adjusted TICK), you have a nice measure of whether
bulls or bears are more aggressive in the marketplace..."
His reference to the TICK as a 'sentiment' measure is very unique, and I
believe shows a great deal of understanding. It's for this reason that we were
eager to replicate his 'adjusted TICK'. As Brett discusses in this mid-
April blog post, "The Adjusted TICK subtracts from each one-minute TICK
reading the average TICK value over the prior 20 trading sessions and then
cumulates the resulting values into a single end-of-day index. This index
tells us if traders are more or less inclined to buying or selling relative to
the recent past."
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S&P Trendline Oscillator
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with Standard & Poor's Trendline Oscillator. Widely quoted by Jim Cramer & others as one of their favorite market timing tools. Usually referred to simply as "the oscillator." Calculation is based on a combination of breadth and price. Long-term range for the oscillator is generally in the +7/-7 range.
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NYSE New Highs-Lows Index
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Current chart (Large Version) |
Long-term Chart
Chart: S&P500 with NYSE New Highs-Lows Index, which is calculated by dividing the number of new 52-week highs by the sum of (new 52-week highs + new 52-week lows). This raw number is then smoothed with a 10-day moving average. Historically, readings below .10 (10%) signal severely oversold conditions typically present at significant bottoming periods in the stock market. |
