12/22/2011 Intraday Watering

[Al_Dente]

PAGING FOLKS WHO ASKED FOR MORE INFO ON INTRADAY INTERNALS AND A/D
THIS IS FOR INTRADAY ONLY and does not apply to swing traders and longer term folks.
(Apologies to those who sent me PMs asking WTF internals, I just found those PMs).

Here’s the rub: EVERYONE here posts much better individual charts of these key market drivers. The only “magic” in Al’s internals is that I throw them all on one chart, one page, in your face, forcing you to see them ALL in a single view so you cannot avoid the interrelationships, the divergences, the signals. I know of no book to recommend that has a chapter called “internals.” Best to just split up the puzzle pieces and study each component individually (use stockcharts.com glossary/search/school or google each component as they are described competently all over the net).

Let’s start with $NYADV/$NYDEC as no one else posts the A/D on this board. The simplest math on the planet: advancing stocks nyadv+ declining stocks nydec + unchanged stocks = the total number of stocks trading on the NYSE today.
Once you understand that the A/D resets every morning on open and you realize it offers a PURE INTRADAY DATA FEED that does not carry over from yesterday, you’re set. Some see it as redundant - already built into price - but it offers key signals unavailable elsewhere. Eg: we use the number level of the advancers/decliners to “tell” us if it’s a “trend day” or a “choppy/range day.” Unoficially that number is >2000 which is often what it takes to sustain a decent trend intraday. Under 2000 indicates a potentially choppy day. A/D can also show us an overbought reading at >2800 which we unofficially call the “nosebleed zone” meaning that because it so rarely goes much higher, it usually needs to pullback near there for a breather. Also we use A/D for price confirmation. If SPY makes a new high we expect NYADV to confirm by advancing to a new high within minutes, if it diverges short of a new high, that signals potential weakness which must be monitored. Also, we make up words like “lobster” to describe the claw-like visual image created when the advancers are for example at 1456 and the decliners are 1489. When faced with lousy 50/50 odds like that, we must EXPECT whipsaws, and trade (or sideline) accordingly. Where else can you find pure unfiltered data that can tell you all that?

$TNX yield on the 10 year gov treasury notes is very important, as the gorilla bond market dwarfs the stock market, and often (not always) leads the way. The $TNX bond market barometer usually moves with spy but IT CAN DIVERGE FROM SPYfor days (or more) before re-aligning. That’s why, for example, when $NYADV diverges intraday it can be critical and we must monitor it carefully, but if $TNX diverges intraday, it doesn’t necessarily carry the same level of urgency. (general rule = yield up = bonds down = spy up).

More on other internals later, but one last rant on VIX:
The VIX has been acting like a crazy bull-spy-wench lately. And when folks start posting that “this time is different” because it’s Xmas or because the VIX is broken and never really worked anyway, or she just follows and never leads, or she only works on Tuesdays, etc. etc., it just reminds me that THIS TIME IS NOT DIFFERENT and VIX is doing exactly what she was designed to do: she is measuring fear (“perceived volatility”), that’s all, and her fear level translates into bull/bear spy levels.
Just show me a chart where VIX was in decline from 40 to 20 while SPY went bear…in other words PROVE YOUR CLAIM WITH CHART EVIDENCE.
Here’s my chart showing that of the 6 times in the last 13 years when VIX moved from 40 to 20 she was accompanied by a bull spy move 6 of 6 times. Only when VIX starts back up from 20 to 40 can we talk about bear spy again. That will happen soon enough (today? tomorrow?), but not while VIX is making lower lows. Also note that VIX has called (via divergence) 5 of the last 6 bottoms (including October 2011 until proven otherwise), so she’s been a very decent indicator, historically.
http://stockcharts.com/h-sc/ui?s=$VIX&p ... listNum=15
PLEASE POST YOUR CHARTS PROVING OTHERWISE.
I posted a similar chart challenge on the weekend board to those who say that “bonds always win” in a bond vs SPY divergence, and nobody took the bait with chart evidence.

PS: re all internals: I am 99.9% convinced that Cobra watches ALL these internals AND MUCH MORE. He just doesn’t yammer on endlessly about them like I do. And perhaps you’ve noticed that when Cobra makes outrageous claims he backs up those claims with some of the best charts in the industry.
PPS: if you don’t yet have Cobra’s subscription service overnight, you are missing MANY days of brilliant VIX analysis and statistics and Discus chatter.

[BullBear52x]

Houston is having problem here, I am neutral here.

[99er]

Could be a great run!

SPX http://99ercharts.blogspot.com/2011/12/spx_6356.html

Shall I go topless?

[jarbo456]

freak'n gold is weak. that thing should be well into the mid 1600's by now.

[BullBear52x]

Sold all TNA at $45.50 and loaded a small batch of TZA at $26.33 (11 cents shy from 52-week low) on premarket.

I shorted TZA yesterday let see

at what price did you sell?

26.92 well, it's all gone now, waiting for more sign maybe selling financial FAS/FAZ next.

[Petsamo]

Houston is having problem here, I am neutral here.

The DAX & CAC40 do not have a higher high on the daily.

[quatzl]

Al, thank you for your explanation. I understand the individual indicators you use, but was having trouble assimilating that information on your single chart.

[Mr. BachNut]

Still Long.
Mechanical model tipped to buy signal yesterday, but upon closer study, I would call it neutral.
On various measures, I see progressive coiling to the apex of a mega-triangle.
So, as intermediate term player, I really don't have a trend to play now, but know one will emerge soon.

The Russell is flirting with the Inverse Head and Shoulders today. If it completes it could force underinvested, underperforming professionals into the long side.
The McClellan Oscilator was neutral and trending up yesterday. I think I will be inclined to go market neutral on signs of overbought.
Stops are in place just in case.

[Cobra]

nothing to say, still on the way to test the overnight high if you recall what I said yesterday opening, the overnight high would be the target.

[Woodcock]

Al, thank you for your explanation. Really useful stuff for a novice like me.

[Me XMan]

That we have a problem!

I might have to go long and hedge my shorts now.

Houston is having problem here, I am neutral here.

[Cobra]

Good morning Cobra.

Do you recommend any good books to read?

Sorry, just saw this. You can check here: http://www.cobrasmarketview.com/could-y ... ing-books/

[BullBear52x]

Here's my yellow lines, not bearish by any mean just hitting resistance.

[uempel]

Still waiting for 1255, 35 minutes to go.

[Cobra]

so far I don't see DAX as strong here. Let's see how it goes in the last hour.

[GreedyKojiro]

Sold all TNA at $45.50 and loaded a small batch of TZA at $26.33 (11 cents shy from 52-week low) on premarket.

I shorted TZA yesterday let see

at what price did you sell?

26.92 well, it's all gone now, waiting for more sign maybe selling financial FAS/FAZ next.

Very nice executions!

[Me XMan]

SPX 1250 strong resistance?

Here's my yellow lines, not bearish by any mean just hitting resistance.

[johnnywa]

Still waiting for 1255, 35 minutes to go.

35 minutes to go?? 1255 top yes,finally broke 1250

[Al_Dente]

Intraday, 5 minutes
http://stockcharts.com/h-sc/ui?s=SPY&p= ... listNum=15

PS: thanks quatzl and Woodcock

[gabor]

covered TZA, TNX is weaker than usual, something is not right.

I do not understand the rationale behind your TZA short and the arguments behind it. TZA is close to its 52 week low, therefor lets short it. The TZA is linked to $RUT, if the russel index is not about to break out from a resistance, why would you expect TZA to break down and behave independently from RUSSEL. Due to the tracking error it is falling more than $RUT would justify it, but it is still linked to it. It woth shorting on long term anyway, because you can earn the racking error, but this is fairly independent of its TA status.