Sunday, June 10, 2007

Short-Term Stock Market Trends and Intraday New Highs and Lows

In my recent post, I illustrated intermediate-term market patterns with 20-day new high/new low data. Above we see 60-minute new highs and new lows among a basket of 40 stocks evenly divided across eight S&P 500 sectors: Materials, Industrials, Consumer Discretionary, Consumer Staples, Energy, Health Care, Financial, and Technology. These 60-minute new highs/lows are updated every 5 minutes during the trading day. The pink line plots the difference between new highs and new lows vs the S&P 500 Index (SPY; blue line) for a bearish day (Thursday) and then a bullish rebound (Friday).

You can see how the levels of new highs minus lows identify the falling market, the transitional period in the middle, and then the bullish thrust. The key is tracking the proportion of time that the new highs/lows are above or below the zero line. In falling markets, we'll see readings hitting -30 and a majority of readings below zero. In rising markets, we see the reverse. It's when the new highs/lows oscillate around the zero level with a preponderance of readings between +20 and -20 that we see consolidation/transitional periods.

The new high/low measure is also helpful in identifying breakouts from ranges--we want to see readings above +20 and below -20 on sustainable breakouts--and is useful in identifying bounces in bearish trends and dips in bullish moves that will not be sustained (readings between +20 and -20 and often within +10 and -10).

The above data came straight from my real time feed (RealTick) and were archived and charted in Excel. Alternatively, a trader could create a basket of stocks within a screening program such as Trade Ideas and track new highs/lows in real time. Readers interested in the specific stocks that I utilize in my basket can check out my "Tracking the Trend" post to the Trader Performance page of my personal site, which will be uploaded later today.


Anticipating Market Turns With Intraday New Highs and Lows


a8703825 said...

Hello Mr. Steenbarger!
I` m very fascinated of your trading strategies and follow them since quite a while.
I wnt to know, if I understand the way, you track new highs and lows right:

Do you track those tickers of your basket, that

a) reached a new DAILY HIGH or DAILY LOW within the last 30 minutes or

b) those ones who reached the highest price of the last 30 minutes within the last 5 minutes?

Sorry -but I think my Bad English is a bit limiting to. I am also a newbie in trading!

Thank you very much!
Dietmar Friedl

Brett Steenbarger, Ph.D. said...

Thanks for the note, Dietmar. The chart looks at closing prices every five minutes for the 40 stocks and how many of those stocks are making new highs and lows for the past 60 minutes of trading. This chart has nothing to do with daily highs or lows.


a8703825 said...

I think you "told us" in one of your earlier articles that you use Tick-data, that you "send" to EXCEL using the program XLC or a similar one. Afterwards you use ?? self-programmed?? " Makros" that calculate the number of new highs and lows als "nearly realtime" within Excel.

I had the same problem regarding your Adjusted Tick and Cumulative Adjusted Tick - you do have extremely interesting ways to track sentiment and momentum- but its not easy to get those data or charts realtime.

My question is:
Is it right, that my next step , if I would like to track similar parameters than you do, should be:

Do you think, Makros in Excel could also do a job like the program MARKET DELTA does - show volume at the bid and at the ask?

Thanks for your help!

Thanks for your help!

Brett Steenbarger, Ph.D. said...

Hello Dietmar,

To track custom indicators in real time, you need a data feed that supports DDE links to Excel. These populate the Excel sheet with the raw data and your formulas in the sheet calculate the indicators and chart them. There is no heavy programming involved whatsoever, other than the Excel formulas. Not all data sources link to Excel in this way, however.