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That One Guy

Market Internals

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Okay, quick question about market internals for the indexes. Is there really any edge on watching market internals? I mean, can't one just learn pure price action and volume analysis? I feel like watching internals along with charts, is almost giving me analysis paralysis. If anyone has experience in this field any advice would be much appreciated.

 

Thanks in adavance

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Okay, quick question about market internals for the indexes. Is there really any edge on watching market internals? I mean, can't one just learn pure price action and volume analysis? I feel like watching internals along with charts, is almost giving me analysis paralysis. If anyone has experience in this field any advice would be much appreciated.

 

Thanks in adavance

Here is my take on market internals JWhite. A number of years ago, I used to plot a chart of the weighted sum of market internals (consisting of the following indices: biotech, software,hardware,financials,semiconductors, Dow,S&P,Nasdaq,Russell). I was under the impression that if I watched the rest of the market, I could get a jump on whatever else I was trading. Net result was zip. Sometimes the internals would lead, sometimes they would lag, sometimes they would move in the opposite direction. I don't follow market internals any longer, but just use the market statistics of what I'm trading to decide entry and exits.

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Hi JWhite,

 

For the US futures, the internals are a handy tool in my opinion. Especially the TICK and TRIN which lets you see shifts in market sentiment throughout the day. I guess it is trader preference, but I had a few strategies based on S&R with internals so it was useful for me.

 

In the Japanese futures market, there is absolutely no internals so had to build one based on several sectors such as: electric machinery, banks, securities, transports, etc... From my experience, simple tools like the TICK and TRIN win hands down.

 

It really depends on how you use the internal tools. I dont expect traders to win by trading purely off internals but I think should be used as a way to better understand the strength vs weakness of the current market situation.

 

Market profile for me better helps me illustrate a potential scenario for todays trading while internals help me time my entries or make instant decisions on whether to enter or not.

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Some people trade successfully without looking at volume or internals. Some Woodie people don't even look at prices.

Each to his or her own. But one thing you have to be prepared for is a lot of work no matter what method you use.

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ANYTHING with enough followers can yield results.

That being said I gave up on internals and only use volume and price mainly.

 

The key is to develop a strategy/setup/system that works for you and fit's your mentality and trading style. Back test and forward test before playing it live and be sure the odds are stacked in your favor. ;)

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I have found that the internals (adv/dec, up/dn volume) generally speaking lag the futures, not lead. However, up/dn volume can be useful. I have found that on the rare strong trend days (like last Wednesday) volume will trend in one direction with barely a hiccup even when/if price pulls back. But on most "normal" days I have found little added value when looking at market internals, almost finding them a potential deterrent to profitable trade setups.

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Nice, thanks for the advice everyone. I have come across tick and price divergence, but most of it was in hindsight. The ticks change so fast sometimes and that causes me to re-think entries, which leaves me with no trades. I have taking a big liking to volume particularly VSA. Anyway, thanks everyone for the help.

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The key is to develop a strategy/setup/system that works for you and fit's your mentality and trading style. Back test and forward test before playing it live and be sure the odds are stacked in your favor. ;)

 

Absolutely Mike... overstudyng can be confusing and internals are tricky eventually... one good pattern, good tools to see it, the desire to make $$$ today, some previous practice and you are in bussiness... after that you must reward yourself ¡¡¡ probably the best on the entire ecuation.... cheers Walter.

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One gauge of internals I watch everyday is the Russell futures contract vs S&P futures on a percentage change chart.

 

When the Russell has relative strength vs. the S&P an up move will persist and a down move will soon reverse.

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I have used market internals for years, I'd hate to trade without them now. I have a breadth ratio indicator on my SPY & QQQQ 5 min charts, that tells me what the up/dn volume ratio for the nyse & naz is without doing the math. 50 being parity, above 75 or below 25 you'll get a move, it also tells me which direction the highest probablity trade is. When the ratio is 40 -60 you'll have a choppy market. I also chart the nyse..naz breadth many days the breadth candles will trend but price shakes traders out, the days where the breadth candles trend, the market will always hit the lo/hi by 3:30 -4:00. I chart adv/dec for nyse & naz also, when the market makes a double top or bottom intraday & the adv/dec candles do not, that's divergance,,thus a high probablity trade has set up!! price candles vs internals candles when there is divergance, there is a high % setup! Price always follows the market!! A # above or less than 600 on the Add/dec chart is bullish or bearish, a # less than 500 you have a choppy market & breadth ratio between 40 - 60.. Thus SOH or scalp time,, take profits quickly where as if the internals are more extreme, I hang on longer. I have a sector list that sorts itself % gainers at the top & loosers at the bottom, if retail & bio-tek are the highest % gainers, the move will not have legs,usually, watch financials & energy, they make up the majority of the SPX. I chart nyse$tick on a 5 minuite with a 5 pivotpoint ema. Like all other tools you have to watch them for a while & learn how to use them correctly. Not everyone trades the same way, but to me, internals are a huge advantage!! Support/resistance #1 ...overall trend #2... #3 internals those are my tools I use Esignal if anyone would like my breadth ratio formula shoot me an email & I'll be glad to share it.

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