EconUp

* Thanks to a perceptive reader for this article on overconfidence and its relationship to reading skill; very pertinent to trading;

* Excellent article on reflation and its implications;

* The need for a level playing field for traders is getting attention in Washington;

* Great way of catching up with trading and finance [...]

When producer Danger Mouse (right above) and rapper/vocalist Cee-Lo Green (left) created the Gnarls Barkley collaboration, the result was music that was qualitatively different than either artist had achieved previously. That music, nominated for four Grammy awards, is most familiar to the public via the song “Crazy“. Perhaps even more creative is Chris [...]

This morning we found out that GDP contracted less than expected and consumer spending contracted more than expected. Stocks veered higher and lower upon the release before moving steadily lower.

How can we tell when economic numbers are game changers and when they’re not? Here are several things I look for:

1) [...]

Above, we see the S&P 500 e-mini (ES) futures over the past several days, highlighting yesterday’s break to the upside, as well as the late pullback. Overnight we’ve consolidated above the late afternoon lows; now I’m watching to see if we can stay above the prior multi-day range (red horizontal line) vs. revert into [...]

When does a person become “old”?

If you ask my teenage kids, 40 seems ancient.

Ask a 40-year old and middle age doesn’t hit until the mid 50s.

Maybe getting old is more a matter of mindset than chronological age: People become old when they decide that the best years of life are behind them.

In [...]

* MARKET THEMES FROM THURSDAY – On the heels of Wednesday’s range bound performance, in which stocks stayed above their overnight lows despite overall selling of risk assets, Thursday started strong out of the gate, reaching the R2 level before the open. We moved to new bull highs on good volume before buying [...]

A savvy developing trader posed this question to me, and it deserves a thoughtful answer.

My reply: Think in terms of structure.

From before the open, I raised the possibility that today could be a trend day to the upside. Even when we were selling off prior to the Noon CT Treasury auction, [...]

Here we see the S&P 500 e-mini (ES) futures on the day via Market Delta. Overall, we’ve seen more volume transacted at the offer than bid (bottom histogram), though selling ahead of the Treasury auction cut into that. We also see a rising volume-weighted average price (VWAP; red line) and price staying largely [...]

One characteristic of trend days to the upside is that the NYSE TICK–the number of NYSE issues trading on upticks minus those trading on downticks–will persistently stay above zero, with many readings greater than +800. That shows that institutions–those that trade the baskets of stocks that will tick up or down in unison–are leaning [...]

Readers of the case studies from my Psychology of Trading book know that I see the role of psychologist as comforting the afflicted and afflicting the comfortable. When people are down, the goal is to help them find their strengths and the energy and optimism to move forward. When they are too comfortable [...]

One of the themes I touched upon several times yesterday was the resilience of the stock market in the face of themes that would normally be bearish for equities: falling commodities and the drop in share prices in China. When markets fail to do what they normally do, that is often an excellent [...]

* THEMES FROM WEDNESDAY’S TRADE – On the heels of a steep drop in China’s share market, we saw an unwinding of many of the risk trades. The U.S. dollar rallied vs. the euro and commodity prices tumbled. Despite these dynamics, the U.S. stock market held above its overnight lows and turned [...]

I wanted to post this Market Delta view of today’s ES market, because it very nicely captures the central identifying features of a range market: a relatively flat volume-weighted average price (VWAP; red line); a narrow trading range and value area (histogram at right); mixed transactions at offer vs. bid (bottom histogram); and [...]

One of my favorite indexes to follow is the Russell 2000 (IWM, above). Small and midcap stocks act as a kind of sentiment gauge among portfolio managers who are trading equities. If they expect growth in the economy, they will invest in companies and shares that are best poised to participate in that [...]

Here you see how we’re setting up for today’s open in the S&P 500 e-mini (ES) futures. The multiday range that has been the subject of several recent posts stands out here. We tested the lower end of that range (the 7/24 lows) on the heels of a large drop in share prices [...]

Last week’s sector review noted that the bullish intermarket themes were in unison, with impressive breadth to the market rally. That strength has carried over to the most recent trading week, as most of the sectors have retained positive Technical Strength readings. Recall that Technical Strength is a quantification of short-term trending, with [...]

* MARKET THEMES FROM TUESDAY’S TRADE: Once again we saw stocks close within their multi-day trading range after breaking Monday’s low and then rebounding in the afternoon. Oil and gold prices turned lower on the day, and the U.S. dollar closed stronger vs. the euro. Ten year Treasury yields fell, but [...]