The Daily Market Forecast... Embrace Change

Tuesday’s Blog Levels: Neither trade triggered.

Quick Tip: Embrace change.

Successful investors and traders alike have a rule-based strategy that provides them a financial advantage or “edge.” A combination of fundamental and technical analysis are typical components. Another analysis you can add to the recipe is investor “mood” commonly called sentiment. In other words, do market participants feel bullish, bearish or neutral about the future?

While every region and country has a unique economy, given the volume of international trade those individual economies are part of a larger “global” economy. The U.S. economy is the largest in the world but more importantly for us it is also the last market traded on the daily clock. This allows U.S. traders a glimpse at how the Asian and European markets are trading before our stock market opens.

Many years ago, I developed a simple indicator for world sentiment, which I call the World Index. The foundation of which is the daily cash market percentage change of the major Asian and European indices along with the U.S. futures percentage change of the S&P 500 index leading into the U.S market open. The indicator outputs an oscillator ranging from +100 (very bullish) to -100 (very bearish).

For years this indicator was a contrarian. If the World Index was negative, long trades performed better and vice versa. It made sense. In a bull market traders buy dips. In the past year the indicator now signals the opposite. A negative reading shows short trades performing better.

Whatever you follow for trading decisions it’s critically important that you document as much information about every trade, taken or not, and then review that information regularly. You’ll find that your “edge” sometimes changes color. Be willing to change.

Today’s Best S&P Turning Points (same as yesterday)

Sell 4468.75 stop 4474.50.

Buy 4325.75 stop 4320.00

Trade Fearlessly,

Mike Siewruk

P.S. If your strategies have proven edge and your results are spotty then you need to change your behavior. Click to learn how.