S&P 500 Index (SP500)

[DiscoverGold]

Trading Notes: Monday, March 7th
By Brett Steenbarger, Ph.D.

* March 7, 2016

* If our trading does not provide these four psychological benefits, we're apt to underperform and lose our ability to perform in the zone. We can best manage our positions if we're managing ourselves well.

* We saw some broad selling late on Friday and so far have not been able to bounce in overnight trading. Friday closed with over 80% of SPX stocks closing above their 5, 10, 20, and 50-day moving averages, but a waning percentage closing above their 3-day averages. (Data from Index Indicators). I would not be surprised to see a normal correction of the recent strength; that should terminate above the late February lows to sustain the current uptrend. I would also not be surprised to see subdued risk-taking ahead of this week's ECB meeting.

* The intermediate-term cycle measures that I track continue to be stretched to the upside. Note how we've rallied in the face of an "overbought" cycle. That momentum suggests that we're not yet at a point where we would expect the uptrend to meaningfully reverse.



* One measure I track is the volatility of market breadth. Specifically, I track the volatility of the daily readings of SPX 500 stocks making fresh new highs and lows on a 5, 20, and 100-day basis. We recently hit a meaningfully low level in that measure. Since 2010, when we've been in the lowest quartile of readings for breadth volatility (as at present), the next five days in SPX have averaged a gain of only .01%. When we've been in the highest quartile, the next five days in SPX have averaged a gain of +.44%. It's one more measure that makes me open to the possibility of some short-term correction of the recent market strength.

http://traderfeed.blogspot.com/2016/03/trading-notes-for-week-of-march-7-2016.html

• George.

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