Wednesday, April 08, 2009

Using a Basket of Stocks to Monitor Intraday Advance-Decline Strength and Weakness


Please check out the earlier post on assessing intraday advance-decline strength to understand the rationale behind the quote board above. The board is one of the screens I look at during the day; it is assembled in e-Signal. If you click on the screen capture above, you'll see the 40 stocks that are part of the basket of stocks that I track for the blog. Five stocks from each of eight S&P 500 sectors (Materials, Industrial, Consumer Discretionary, Consumer Staples, Energy, Health Care, Financial, Technology) make up the basket. Note that the stocks are arranged by sector so that I can identify sector strength and weakness at a glance.

For the column that lists "Change", I right click and select the option "Compute Change" and "From Open". What this shows me at a glance is how the stocks are behaving within the regular trading day, ignoring the impact of any opening overnight gaps. I have found that to be very helpful in gauging when the market is in a trending mode intraday (the great majority of stocks up or down) vs. non-trending (a mix of shares rising and falling).

In a range market, stocks won't vary greatly from their opening prices, creating a mix of advancing and declining issues. Because the changes on the quote board are color coded as green (up from open) and red (down from open), it is easy to see at a glance when there is a mix and when directional trade from the open dominates. It is the count of stocks up and down from the open that I report during my intraday Twitter posts (free subscription).

If you're looking for a stripped down version of monitoring intraday advance/decline strength by sector, you can replace the stock names with the sector ETFs: XLB, XLI, XLY, XLP, XLE, XLV, XLF, and XLK. You might also include IWM (small cap stocks) and QQQQ (NASDAQ 100 stocks) as "sectors". At a quicker glance, this will give you advance-decline strength by sector, highlighting sectors showing relative strength and weakness intraday.

In an upcoming post, I will outline yet another valuable application of these data. And, by the way, my morning Twitter posts before the market open outline the number of stocks in this basket that are in short-term uptrends, neutral, or downtrends; this provides a bigger picture view of market strength and weakness, particularly if you compare the numbers from day to day.
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12 comments:

SSK said...

Hello Brett, thank you for the screen shot. Best, SSK

Randy Reis said...

Hi Brett, just so you know, you have DIS listed twice

Brett Steenbarger, Ph.D. said...

Thanks, Randy; I just uploaded the new, correct screenshot. What I originally included was an old one that had several stocks no longer highly weighted in their sectors (along with the DIS redundancy in place of PG).

Brett

Randy Reis said...

So, you're human too? Thats not allowed Doc!

Brian said...

Twitter not ready for prime time?

Your twitter posts are great but this week they are taking as long as 20 minutes form the time you post them to show up on Twitter and longer on Tweetdeck.

Just an fyi for you. Its all posts, not just yours, by the way...

davez said...

Hi Brett,
Similar to your use of the quote list, something I find useful is to plot the key sectors (XLE, XLF, XLP etc) in an eSignal intraday Std Chart with a % Y-axis. They all start plotting with their Open at '0' and then you can readily see which sectors are above or below the '0' line. And sometimes divergences can be seen at reversal points which indicate a change in relative strength (i.e. which sector is leading the reversal).

Brian said...

For example, your 10:14 upside bias post just showed up on Twitter a couple minutes ago and you have already scratched the trade, per your website.

Smeldmf said...

I watch many baskets similar to what you've got there. In addition to watching daily %-change and Net-change, I have a column that displays, on a percentage basis, where each stock is trading within its current daily range. A stock reading "100" would be making new highs; a stock at "0" would be hitting new lows. I find this saves me time by allowing me to avoid pulling up individual charts. It provides an easy way to gauge which stocks(sectors) are participating in moves to new highs/lows in each sector (market).

I've been reading this blog for a couple years now, but this is my first comment. Yours is the only blog that I read every day, usually multiple times. I just got my copy of your new book and can't wait to dig in.

Keep up the fantastic work! It's very much appreciated.

StockManiac2008 said...

Here's another way to tack these Key Sectors
http://finviz.com/screener.ashx?v=141&ft=1&t=XLP,XLY,XLE,XLF,XLV,XLI,XLB,XLK,XLU,IYZ,IWM,QQQQ&ta=1&p=d&o=-change&r=1

This is sorted by today's performance. They use delayed quotes, but still is useful I hope.
Thanks for blogging, learning a lot from you.

StockManiac2008 said...

Oh, looks like the link may be broken.
Here's the tiny URL for that link
http://tinyurl.com/dxb4aj

Cap said...

Thanks Brett ! and everyone else .. good stuff !

heywally said...

A nice representation industry.

I also include some of the heavier weightings in the QQQQ: AAPL, QCOM, GOOG, ORCL. And then XLF and OIH.

Thanks ...