Wednesday, September 30, 2009

Gauging Trend Status With Intraday Advance-Decline Data

One indicator regularly on my screen is the intraday advance-decline number: the number of NYSE stocks advancing minus those declining for the day. When that number is below +1000 and above -1000 in midday trade, it's a good tell that we're in a range bound environment.

Non-confirmations of stock index moves by the intraday advances/declines can also be informative. Although the indexes closed near their lows for the day yesterday, the number of advances minus declines was well off its lows. That told me that the market was closing stronger than it appeared.

Also useful in this regard is monitoring the number of stocks advancing versus declining from their opening prices (see this post for details and this post for explanation). That number stayed negative for most of yesterday, alerting us to late day weakness.

I regularly include intraday advance-decline data in tweets during the trading day (follow here), as a way of gauging trend vs. non-trend status for the day. Once I establish trend status, I then use the price targets published each morning via Twitter as a guide for where moves to and away from value might take us. Range markets will tend to revert toward value (pivot price); trend ones will move toward the R1/S1, R2/S2, and R3/S3 targets.