Monday, March 27, 2006

Trading Update Monday 3/27

I'll be returning to regular blog posts and updates on the Trading Psychology Weblog on Thursday. Monday's market continued the narrow action in the S&P 500, continuing the neutral trend. It was a great illustration of the kind of day I referenced in the recent post about mean reversion. Knowing the day's average price and seeing: a) an open near the average price; and b) low volatility from the prior session; and c) modest early volume allowed traders to lean on the market's tendency to revert to that average price. Here is the Trading Markets article on that topic.

I notice that we had an expansion of new 20 and 65 day highs, but also an expansion of lows. Demand was 59; Supply was 69, which means we had slightly more stocks showing negative momentum than positive--but the majority not showing any distinct momentum. We need to see a move out of the recent several day range accompanied by an expansion of new highs/lows to establish a directional trend.

2 comments:

John Wheatcroft said...

What do you have following fed announcement? I'm sure you've looked at it.

Brett Steenbarger, Ph.D. said...

Hi,

It's not the announcement that matters; it's the subsequent move in interest rates and the dollar. The extent of those moves correlates well with the volatility and trending of the move in stocks--

Brett