Daily Plan 3/24
Excuse me what the...
Hello traders,
Another exciting day in Spoozland.
I was away from the computer first half of the day due to personal commitments, however in the second half I caught a couple 20pt zippers and got stopped a couple times. Not a bad day at the office.
I want to talk about Market breadth and how it affects us and how we can take advantage of it.
Market breadth indicators, such as TICK, TRIN, and the NYSE Advance/Decline measures, offer valuable insights to traders seeking to assess the overall vitality of the stock market. By shedding light on market sentiment, these tools can reveal potential trend shifts or continuations.
TICK is an intraday gauge that calculates the difference between stocks trading on an uptick (rising price) and those trading on a downtick (falling price). Predominantly employed for the NYSE (New York Stock Exchange), this index can also be adapted for other exchanges. By pinpointing short-term market sentiment and potential overbought or oversold scenarios, TICK can help identify possible reversals. Positive readings imply a predominance of upticks, while negative readings suggest the opposite.
TRIN, alternatively known as the Arms Index, is another market breadth indicator that compares the ratio of advancing to declining stocks in relation to the ratio of advancing to declining volume. The formula is as follows:
TRIN = (Advancing Stocks / Declining Stocks) / (Advancing Volume / Declining Volume)
TRIN helps traders discern market sentiment and potential overbought or oversold situations. A reading of 1 denotes a balanced market, while readings above and below this value indicate bearish and bullish sentiments, respectively. Extreme TRIN readings may signal potential market reversals.
The NYSE Advance/Decline indicators comprise a set of market breadth tools that quantify the number of stocks advancing (closing higher) and declining (closing lower) on the NYSE. The Advance/Decline Line (A/D Line) is the most popular indicator in this category. It is determined by adding the net difference between advancing and declining stocks each day to a cumulative total. A rising A/D Line reflects a robust, broad-based market rally, while a declining A/D Line may signal a weakening market or potential trend reversal.
Other indicators in this category include the Advance/Decline Ratio (A/D Ratio) and the Advance/Decline Volume Line (A/D Volume Line), which measure the ratio of advancing to declining stocks and the cumulative difference between advancing and declining volume, respectively.
In essence, the TICK, TRIN, and NYSE Advance/Decline indicators serve as crucial instruments for evaluating market sentiment and pinpointing potential trend reversals or continuations. When utilized alongside other technical and fundamental analysis techniques, these tools enable traders and investors to gain a more comprehensive understanding of the stock market's health, thus facilitating well-informed decisions.
These three are a great addition to your arsenal of tools in order to trade the indices.
Moving on,
Plan for tonight is as follows:
ES:These are the levels for the overnight session: