c04 JWBT016-Busby September 30, 2008 13:48 Printer: Yet to come
Commonsense Market Indicators 55FIGURE 4.1 Example of the reference bars that I use to guide my day-trading
path. These reference bars identify the high and low during a specific 30-minute
time frame.the E-mini futures. The important information that I need to know is the
opening price, closing price, high, and low during a specific time of day.
Therefore, the Seven Sisters are important to my trading and I use them
as indicators of market sentiment. They point me in the right direction. If
there is divergence among the Seven Sisters, I stay out of the market. For
example, there are days when the Nasdaq index is trading in positive terri-
tory while the S&P or Dow is posting negative numbers. Such divergence
signals danger. The message is one of confusion. Traders in general are
unsure as to what action to take. There is no market consensus. On these
days it is impossible to put the odds in my favor. Therefore, I sit and wait
and keep my powder dry. There will be better days when the direction is
clear and the odds for success greater. I will patiently wait for those days.
In addition to these guides, I use some other statistical indicators.
I generally keep an eye on the New York Stock Exchange (NYSE) and
Nasdaq issues, the NYSE tick, the Arms Index, and a couple of indicators
that I have designed.The NYSE and Nasdaq Issues
The NYSE and Nasdaq issues reflect the number of stocks that are above
their previous day’s closing price as compared to the number that are be-
low that price on the NYSE and Nasdaq 100, respectively. These statistical
indicators are important to my trading approach. When gauging them, I use
500 as a benchmark or watershed level. If 500 or more of the issues are trad-
ing above their latest closing price, I will look more to the bullish side. If