Wednesday, May 06, 2009

When Market Moves Lack Broad Participation


One of the things I try to do with the tweets and intraday blog posts is point out recurring patterns that can lead to good trades. Here we see the S&P 500 e-mini contract (above) making new highs in the afternoon on the heels of strength among financial shares. Those new highs, however, were not confirmed by fresh highs in the NASDAQ 100 Index, the Russell 2000 stocks, or the XLB, XLY, XLP, or XLV sectors. That has led to a retracement back into the day's range, with the day's volume-weighted average price (around 908.50) as a logical target.
.

10 comments:

MineDigger said...

Hi,
Thanks for your ever incisive comments, but a little technical query/comment re "the day's volume-weighted average price" pls...
On the chart you are showing the eSignal MA (20) with the Volume Weighted option set; aka a Volume-Weighted Moving Average. Surely this is not the same as the VWAP (Volume-Weighted Average Price) which is a sum from the start of the session, ie it has no period? At the time your chart was recorded the VWAP I use (midnight-based, bar averaging) was near the new low and seemed to provide support. For a VWAP for eSignal there are a few .efs scripts available for download.
Interestingly, a comment to the "A look at a Difficult Day" post referred to a "running average price", Wikipedia indicates this is an ambiguous term; I think it was meant to mean a "Cumulative moving average", ie a day's sum like a VWAP (ie no period), but without the volume-weighting. Having been unable to find a .efs for download I was surprised that the one I quickly wrote (ie may be wrong) produced a result very close to its VW cousin - it would seem volume affects average price less significantly than we think. But neither are the same as a Volume Weighted Moving Average.

Dave

MineDigger said...

a PS: And now I reread the post I see that the value stated as the target, the VWAP at 908.5, is not meant to be the line shown on the chart anyway, so perhaps these two posts could annihilate each other to save my embarrassment!

OKL said...

Very happy to say that I caught both the moves you mentioned, without actually noting your twitters, ironically.

Once again Doc, I'm learning a great deal from ur blogs and books... Thanks a great deal!

MineDigger said...

ok, pps, what I should have said first time around:
Hi,
Thanks for your ever incisive comments, but a little technical query/comment re "the day's volume-weighted average price" vs the line shown on the chart pls...
On the chart you are showing the eSignal MA (20) with the Volume Weighted option set; aka a Volume-Weighted Moving Average (VWMA). In the text you say "...with the day's volume-weighted average price (around 908.50) as a logical target" (ie the VWAP). It's a little confusing to mention one, but show the other!
[And just for anyone who wants be clear... the VWAP is a sum from the start of the day's session, ie it has no "period" (but some people do use multi-day VWAPs I believe, and there is always the debate as to what to do about the pre-market/pre-pit data of course); whereas the VWMA is more like a moving average so has a "length" (the period). For a VWAP for eSignal there are a few .efs scripts available for download.]
Interestingly, a comment to the "A look at a Difficult Day" post referred to a "running average price", Wikipedia indicates this is an ambiguous term; I think it was meant to mean a "Cumulative moving average", ie a day's sum like a VWAP (ie no period), but without the volume-weighting. Having been unable to find a .efs for download I was surprised that the one I quickly wrote (ie may be wrong) produced a result very close to its VW cousin - it would seem volume affects average price less significantly than we think. But neither are the same as a Volume Weighted Moving Average.

Marc said...

Anyone who sold short into that last hour selloff had to be very nimble or they would be looking at a loss right now. What do you make of that?

David said...

Hi Dr. Brett,

Your post on Coaching Traders was excellent. I read a few more posts on trading psychology and they definitely got the wheels turning.

As an experienced prop-trader who has had moderate success. I often find myself thinking, "the work i am doing is somewhat selfish, i am not providing a service or helping others in any way." I believe these thoughts must hold me back from being the best trader I can. Although there are so many aspects of trading I find fascinating I continue to let these particular thoughts hold me back. Have you had experience with other traders with similar obstacles? What do you recommend to counteract these thoughts?
Many Regards

Aaron said...

Dr Brett,

Thank you for the chart. Would you categorize that late day reversal as a momentum exhaustion transitional pattern? The price high was made on a large volume thrust then was retested on dramatically less volume.

Swing said...

Hi Mr Steenbarger,
just wanted to say thank you very much for this blog and your book "Psychology of Trading" which I am reading and learning from every day!

Have a great day!
Kind regards

Ziad said...

David,

I'd just like to quickly say that you ARE providing a service and helping others by being a trader. Think about it, if there were no traders, there would be no liquidity. If there were no liquidity, then much fewer people would be willing to buy stocks as they would have trouble selling when they needed to (illiquid assets are much less in demand). And if very few people are interested in buying stocks then private companies wouldn't be able to issue stock to go public and expand there operations. In short, the world you see today, with all of its conveniences, not to mention all of the advances in medicine, shelter, transportation and communication that help human beings everywhere, is a result of companies being able to raise money, innovate and expand. And without traders providing liquidity, there would be no market for them to issue stock to make all of this possible. They'd remain small enterprises without the resources needed to innovate and provide services to the world at large.

So rest assured that you provide a great service indeed, and one of the most important ones in society at that. It's definitely not selfish to be a trader in the grand scheme of things.

Ziad

Antonis Protopapas said...

May I ask what platform you use to show us charts like this one?

Thanks you