c04 JWBT016-Busby September 30, 2008 13:48 Printer: Yet to come
56 A FOUNDATION FOR SUCCESS
500 or more of the issues are negative when compared with their previous
day’s close, unless there is some other strong information to the contrary, I
will be looking for a shorting opportunity. If both the NYSE issues and the
Nasdaq issues are strongly expressing a bullish or a bearish opinion, I pay
attention.
I never trade without taking a look at issues. Sometimes the NYSE is-
sues will be moving in one direction and the Nasdaq issues will be trending
in another. Such divergence is a red flag and I keep my hand off the mouse.
When two major indexes or indicators are moving in opposing directions,
it tells me that traders are confused and no trend has been identified. When
I see that scenario, I move to the sidelines and wait for a discernible trend
to appear.
The NYSE issues may be used only during the hours that the exchange
is open. Therefore, other indicators must be used after hours. However, if
the issues were very opinioned at the close, they may point the way toward
a direction for trading the night markets. For example, if the issues are
positive 1500 at the session’s close, traders have expressed a bullish mood
and one would need to exercise care and caution before taking a short
position in the night market. If going short, be sure there is confirmation of
the move from some other benchmark.The NYSE Tick
Another indicator that is followed by many traders including myself is the
NYSE tick. This indicator reflects the difference between the number of
stocks ticking down and the number of stocks ticking up in price on the
NYSE. This is a leading indicator for market direction. It is like the rpm
gauge of Wall Street. If this indicator is strongly positive, start looking for a
buy point; if it is strongly negative, you do not want to join the bulls. If you
trade with a strongly negative tick, you will likely be a seller. Readings that
are+500 to−500 are neutral and I do not deem them to express any spe-
cific sentiment. However, once readings register more than 500, I believe a
sentiment is evident. The higher the number soars, the stronger the senti-
ment being expressed. If the tick reaches 1000 plus or minus, the mood of
the market is undeniable. When prices go so high, the market is probably
overbought or oversold, and a reversal—even if small and brief—is to be
expected. When the markets are running so fast and furious, they simply
need to breathe and may take a rest. A tick reading of 1000 simply cannot
be maintained for very long, at least not on the average trading day. If the
market is indeed bullish, after taking a brief rest, prices may surge again.
Therefore, if the NYSE tick is measuring 1000 and I am looking to go
long, I will probably wait until the tick backs away from the high before ex-
ecuting my trade. Then, if conditions support a long position, I may buy the