Thursday, January 14, 2010

Identifying the Dynamics of a Range Day in the Stock Market

Today's stock market illustrates many features of a range day:

1) Advancing and declining stocks running close to even;

2) Price oscillating around a relatively flat volume-weighted moving average (blue line above);

3) Mixed performance--no distinct themes--among currencies, rates, and related asset classes;

4) Mixed performance among stock sectors;

5) Reduced volume on the day.

Catching these signs early can help traders identify day structure and formulate trading plans for the day.