Trading Notes: Tuesday, February 16th By Brett Steenbarger, Ph.D.
* February 16, 2016
* In a new article, I expand on the idea of time mapping and offer a heatmap-inspired example. This is a technique that is particularly useful in creating the motivation and momentum to make changes in any area of life, personal or professional. There are many techniques out there in the self-help literature to help people change; not so many methods to help people find the drive to sustain change.
* We've seen some consolidation in overnight trading after a sizable rally. Note that Friday closed with only 35% of SPX stocks trading above their 10-day moving averages. Even if the current rally ends up being a bounce in a broader bear market, I expect some upside follow through as we work off the oversold condition from a very weak start to the year.
* I continue to find overbought/oversold measures utilizing event bars to be useful in finding good trade location and identifying short-term market cycles. Below is a simple rate-of-change measure using event bars, where each bar represents 500 price changes in the ES futures. Other event charts that I maintain draw the bars on the basis of number of trades and on the basis of volume transacted. My most recent trend-following system makes use of event bars and has done quite well identifying intraday swings. As of this writing, that system enters SELL mode below 1881 in the March contract. The buy and sell parameters change with each new bar and adjust in real time for market volatility.
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