market judgement

[Cigar]

We are all experts at individual share selection (ha) and probably all have different selection methods. We also have to take into consideration the mood of the market. Our share selection may look a screaming buy but if the market looks ropey, we should stand aside.

My question.. How do people judge wether a market is good or bad. When to stand aside, or when to get back into play. I'm not worried about sideways markets, or gradual up/downs. I want a signal for the dire occasions that says 'don't even consider it at the moment'

A couple of possibilities are
1. only consider buying when the 20 day ma of your shares index is moving up or at least flat.
2. the index is within the CCI channel. If it falls below, don't buy until it climbs back in. (You will miss bottoms like this but you would be waiting for a more stable market)
3. as above but using RSI

Anybody have any other methods or do we all just leap when the NAS goes up before the UK close.

rgds

 

[traderx]

This is an excellent subject Cigar and something which we all need to address. One way to get a feel for market direction is to look at the price action within Bollinger Bands. One of the boys made the point recently prior to the latest sell off that, looking at most shares on FTSE 100 the price action was approaching upper BB in a down market. The same rule applies to indices.

IN AN UP TRENDING MARKET, PRICE ACTION AT UPPER BB WILL OFTEN SIGNAL BULLISHNESS.

IN A DOWN MARKET IT USUALLY MEANS RESISTANCE AND OVER BOUGHT POSITION.

I think this is only one method in a traders armoury. I also think the points raised in your opening thread are valid. In reality it is difficult to call in volatile markets and I hope members will share their thoughts on this one.

Tx

 

[ChartMan]

My favourite (in AIQ) is Velocity. I don't even think about it if it's going in a downward direction, and especiailly if it's below zero.The setting I use is 11 (days) and this seems to work well.
For those trading NDX, I have found that RSI AIQ is a good indicator,rising above 70 giving a BUY and falling below 60 giving a SELL ( used in conjunction with macd and velocity).
Even so, one whisper of bad news will be enough for the MM's to take a stock down 30%!!!!
I fancy more and more the likes of DEB, SOF,TSCO....Wimpish I know, but we all have to eat etc.

 

[darth trader]

An interesting thread.

Of course any method that you use to measure a stock is also valid for the market although there are also market breadth indicators that are available and volume based data is generally less available for markets and indices.

DEB,SOF and TSCO are interesting examples of stocks that have low or negative correlation with the Nasdaq.

Trend and volatility (eg. bollinger bands) based indicators are always useful too.

Darth.