Tuesday evening

SPX Daily

Today was the second time the bulls pushed up and tagged the 50day SMA on SPX (1435). We didn't see as much of a negative reaction as we did on Friday, but it still closed under it. With the election results coming tonight, I'm guessing S&P futures are going to be pretty active. 1430ish on the futures is equivalent to 1435 on SPX... so I'll be watching that level pretty closely if the bulls get busy.

Market internals

It is helpful to keep an eye on market internals.  Probably more so for Josh and me because we’re trading the index futures, but it’s also important for stock traders.  Most stocks follow the market, so it is a lot easier to go with the flow of the market than to try to fight it.

Above is a pic of my internals tab.  It’s laid out like this

$TICK	VXX inverted	AUDJPY
$ADD	$VOLD	$TVOL

All of these are 1min except $TVOL, which is 65min bars.

$TICK

NYSE tick -  the number of stocks ticking up minus the number of stocks ticking down on the NYSE

This is the quickest of my indicators to respond to the market.  I am interested in absolute levels and in its trend direction.  I have alerts at +1000 and -1000, as these tend to be extremes (and indicate when buy/sell programs hit). Also, if I'm looking, I can sometimes spot divergences where the markets are making new lows/highs but $TICK is not. These times often mark turning points.

VXX inverted

Inverted because I got tired of thinking “up bearish, down bullish”.  ( I don’t have VIX data, this seems close enough)

AUDJPY

Whether because of “risk on / risk off” thinking or some carry trade, I don’t know, but the market responds to this currency pair (especially to the up side).

$ADD

NYSE advance / decline line.  If this is flopping around zero, it’s likely going to be a choppy day. Very strong / weak days will run +1500 / -1500 or more.

$VOLD

NYSE up / down volume.  If this is trending strongly, I try not to trade against it.

$TVOL

NYSE total volume by day, in 65min bars.  I’m interested in whether today’s volume for the current time period is above or below prior days, as it indicates how much commitment traders have to the current movement.

Mostly, I use the internals as a “don’t fight it” filter.  That is, if internals are strongly bullish / bearish, I try not to go short / long against them.  Or, as a “don’t do it” filter (e.g. it looks long but the internals are still leaking).  If they are more neutral, I tend to go for quicker scalps.  Sometimes I catch a heads up when one of the indicators turns.

Not sure how well you can see the picture, but it was taken on Thursday November 8 around 3 p.m. when the Dow was up 130. $ADD was pretty good, not great. The real outlier was $TICK, which had only registered a high of 908 all day and was then running around 300 average. That is a very weak $TICK for an up day. In other words, the day was not as strong as it looked. The next day reversed all of Thursday's gain.

Tuesday Morning

Gator's Chart of the Day: IDCC

Intellectual property continues to be in the news and that's what Interdigital Communications Corporation is all about.  I can't say that the stock is at a good buy point but if it comes back to the horizontal support line (38ish) that could work.  It would be even better if it came back a little more to bounce from the 20/50 day sma confluence.

I probably won't be in this one.  I lost my a$$ets on it last year and I am afraid I would treat it as a revenge trade.  Those rarely work out well.