I hear Karl and others prognosticating about what will happen if the day closes up or down, or beyond a certain technical level. What is so important about the level at which the day closes, and what does it tell you about what is likely to happen the next morning? Thanks in advance.

The internals are quite important. For example, today the TRIN went out at 13.something - that's insanely oversold (higher = more selling, neutral = 1.0) Indeed, I'm not sure I've ever seen it close that high.

Why is it important? Mostly sentiment - that is, a climax of selling usually marks at least a short-term turn.

Levels are a bit different. Let's say there's a lot of activity at 1050 in the S&P 500. That is, the market took some time getting through there. There are thus probably a lot of people who bought on the way up at that point.

Assuming they're still holding, when we come back down that's the point that changes their "profit" to a "loss." Will it cause them to immediately sell when it is passed? Not necessarily, but it does change the bias - it's a hell of a lot harder to watch the red numbers get bigger than the green ones get smaller!

The only time it ever closed higher was that big dump in feb 07 (Thanks to whoever it was that pointed that out.)

02/27/07 SPX close 1399.3 Four days later close 1374. ~2 % lower

because things rarely go up or down in a straight line. and extremes in either selling or buying generally point to turning points. As for why the close for the day or close for the week matter as much, it because different people have different timings they use in the market.

Some may use a strategy with minutes as the window, a swing, a good bottom starting to build, go long, a peak, sell. The same is true and the same strategies work with any time scales. You can pull up a minute chart, or a daily chart or a weekly chart and use many of the same indicators to gauge sentiment. Not just sentiment tho, direct selling or buying pressure, you can guage if something is in a trend or if it is just trading and moving in a channel. Landing a close on the daily is a "stronger" signal on the strenght of a directional move. Landing a weekly close is even stronger.

Go look at a chart of any stock on stockcharts.com .. change from daily charts to weekly charts. The weekly really captures the big picture, the daily has many girations, the hourly or minutes, are very chaotic. Even tho they are chaotic, they are still tradeable provided you can be agile and flexible enough. Many people prefer to trade with longer durations. Hell until the last decade most people traded off the print in the newspaper every day. MANY still do that.

Todays close was an extreme, and it likely indicates one of two things, a turning point in the short term where Monday will rally - or two a weekly indication of a major decline in the works. Many here, myself included think both are likely scenarios.

because things rarely go up or down in a straight line

But when they do, the normal technicals break down.

The bad news is like a continuous artillery barrage. I think the flash crash scared the **** out of people so they are much more prone to sell first and ask questions later.

I think there will be another one. Even the HFT guys don't want to be on the wrong side during a crash.

From what I have read HFT trading is about 70% of the market and until recently it caused price drift which was higher (slow and steady). But now could it be that with some panic selling by the non-HFT part of the market it causes a real break down in the algorithms and will cause a fast move down which the PTB will not be able to slow down?

I also think if prices move down too fast many of the institutions/insurance companies and countries will fall hard and fast. But will it be a buying opportunity like when the S&P hit 666 or will the market be dead for years to come.

Could you explain exactly what a TICK is?, or what you are referring to when you use that expression please.

This tool compares the number of stocks on the New York Stock Exchange that are rising to the number of stocks that are falling.

The calculation is very simple. You take the upticking (or rising) stocks and subtract the downticking (or falling stocks).

If the number is positive, that means more stocks are rising than falling. If the number is negative, that means more stocks are falling than rising.

When the TICK approaches +1,000 or -1,000, watch out. These extremes indicate a severely overbought or oversold condition.

In either case, expect the market to abruptly reverse itself.

Understanding the TICK can help you decide when to buy or sell.



From http://stocks.about.com/od/evaluatingsto....

Thanks, so what is the easiest way to watch "it"? how do you as a trader monitor it?
or what I probably mean, is What is the best link for it, or the best page that incorporates it ?

Best bet is to get real time info from your trading platorm - it will be a symbol.

Sorry, that 13.x print was on TRIN, not TICK.

TICK levels over 1000 or under -1000 are extreme and often point to short-term reversals. If the movement continues THROUGH them, it's EXTREMELY powerful.

TRIN is otherwise known as the "ARMS" index, and is defined as:

Investopedia wrote..

A ratio of 1 means the market is in balance; above 1 indicates that more volume is moving into declining stocks; and below 1 indicates that more volume is moving into advancing stocks. This indicator was developed by Richard Arms.

It is a ratio, and thus is always a positive number. 1.0 is neutral, CLOSING values over 2.0 are oversold and under 0.5 are overbought.

13.x is outrageously oversold.

If you use TOS, it's $tick and $trin. Likely similar names on any platform.