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MTT - Analysis Tools Flashcards

1
Q

What are internals and what do they tell us?

A

The language of the market

What’s happening now and what’s about to happen, from a factual standpoint

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2
Q

What happens if we don’t understand the market language?

A

We’ll be able to get by, but we’ll be at a disadvantage

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3
Q

What’s mandatory in any trade?

A

A pre-planned exit strategy

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4
Q

What are the 2 things to remember when it comes to analysis?

A
  • More data does NOT equate to better decisions

- The markets spend A LOT of time meandering back and forth

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5
Q

What are the 3 tricks with internals?

A
  • look at just a few of them
  • recognize the patterns
  • track the extremes
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6
Q

What makes understanding internals deeply so valuable?

A

Plenty of traders who only have the vaguest idea of how to interpret the tools, and larger amount of noobs that have no clue they exist. This is a large pool of cash ready to be plucked

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7
Q

What are the best kind of move to catch?

A

Short covering rallies. Shorts get spooked, new longs coming in, all against the backdrop of “bad news”

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8
Q

It’s rare for the moving avg on the 5 min $TICK chart to cross the +500 or -500 levels. What does this mean?

A

There’s sustained pressure in the markets

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9
Q

It’s rare for the moving avg on the 5 min $TICK chart to cross the +500 or -500 levels. What does this mean?

A

There’s sustained pressure in the markets

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10
Q

What are the 2 most important internals?

A

$TICK and $VIX

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11
Q

What’s the favorite day for extreme moves?

A

Monday

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12
Q

What does the $TICK measure?

A

The cumulative buying/selling pressure and conviction for the NYSE and other equity markets

Summarizes number of stocks on NYSE that are increasing vs number decresing in price since the last quote

Most accurate reflection of immediate mood of market - party, chill, panic

There’s $TICK readings for other indexes, they move the same, watching one is easier than watching 6

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13
Q

What does the $ADD measure?

A

Number of advancing stocks less the number of declining stocks

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14
Q

What does the $VIX measure?

A

Market’s expectation of 30 day volatility - aka “The Fear Index”

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15
Q

What does the $PCVA measure?

A

Combined index and equity put/call ratio

How many put options are bought relative to call options

volume for puts / volume for calls

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16
Q

What does the $VOLSPD measure?

A

Difference between amount of volume trading above or below yesterday’s closing prices

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17
Q

What’s the 1st rule when watching the ticks?

A

Any tick reading in between –400 and +400 is noise and should be ignored.

This means that there’s no conviction in the market.

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18
Q

When is it time to start paying attention to the $TICK?

A

Any reading over +600/ under -600

Larger the number, more intense the pressure is that’s being applied to the markets

If a spike lasts a few minutes, eases back, then hits a new higher level, then the conviction is real

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19
Q

What’s the 2nd rule using the ticks for day trading?

A

If I’m long intraday and my stop hasn’t been hit and the markets generate a tick reading of –1,000, bounces back to –500, then rolls over and makes a new low, I’ll close out my position at the market.

Similarly, if I’m short and the markets generate a tick reading of +1,000, pulls back to +500, then pushes up to new highs, and my stop hasn’t been hit, I’ll close out my position at the market.

Getting out of trades before stop points is huge for risk/reward ratio

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20
Q

When is it never okay to exit a trade?

A

When we think we’re wrong - it has absolutely nothing to do with what might happen next

Measurement tools are what we follow

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21
Q

What’s the one thing that keeps most people form making a living as a trader?

A

They don’t manage their exits.

They want to be right and make money on the day.

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22
Q

Why is +1000/-1000 the most important level in the ticks?

A

Usually represents the maximum buying or selling pressure the market can handle - time to take action

23
Q

What’s the 3rd rule with ticks?

A

If the markets are quiet and we suddenly hit +1,000 ticks, I’ll use that as a signal to fade (short) the market move.

Under the same circumstances, if we suddenly hit –1,000 ticks, I’ll use that as a signal to fade (buy) the market move. The first test of these levels is often a head fake.

24
Q

What’s the 4th rule with using ticks?

A

Setup audio alerts at all key levels. That way we don’t have to watch the charts

+- 1200, 1000, 800, 600 - and draw horizontal lines here

25
What does a probe look like?
When the $TICK hits +/-800, jumps to +/-1000, then returns to the zero line, no real conviction A jump back to +/-1200 indicates the start of possibly a much bigger move
26
If we see ticks +/-600 that can't move the market, what does that tell us?
That the inverse pressure is predominant
27
What's the 5th and final rule regarding ticks?
When the ticks spend 90% of their time above 0, with repeated extreme high tick readings - Ignore short setups all day and focus on longs Vice Versa - ignore long setups all day and focus on shorts
28
What do ticks tell us about price action?
How much momentum there is behind the movement
29
What does the $TIKI measure?
Measures the net upticks vs downticks on 30 DJIA stocks - not entire NYSE Fastest Heads-Up That Stocks Are About to Make a Move First thing that fires off when a buy or sell program hits the markets
30
What are the notable levels when looking at the $TIKI?
+/-26 - small programs +/-28 - medium programs +/-30 - massive programs
31
What's the 1st rule with the $TIKI?
For exits, tiki readings are only the heads-up; ticks are the confirmation
32
What's the 2nd rule with the $TIKI?
If buy programs are driving the markets to new highs, then the occasional sell program is a buying opportunity
33
What's the 3rd rule with the $TIKI?
If sell programs are driving the markets to new lows, then the occasional buy program is a shorting opportunity
34
What does the $TRIN measure?
Number of advancing stocks divided by the number of declining stocks - aka "The Arms Index" Relative rate at which volume is flowing into advancing or declining stocks on the NYSE (advancing issues/declining issues) / (advancing volume/ declining volume) If more volume goes into advancing issues than into declining issues, the Arms Index falls below 1.0 If more volume goes into declining stocks than into advancing stocks, the Arms Index rises above 1.0
35
What does most educational material on the $TRIN teach?
Over 1.0 is bearish, so consider shorting Under 1.0 is bullish, so consider buying Annoying and misleading
36
What's the 1st rule with reading the $TRIN?
I don’t care what the current reading is. I care about the current reading only in relation to where it has been
37
What's the 2nd rule with reading the $TRIN?
If the trin is trending higher and making higher highs on the day, I’ll ignore all long setups. If the trin is trending lower and making lower lows on the day, I’ll ignore all short setups
38
What's the 3rd rule with reading the $TRIN?
If the trin closes above 2.0, the market has an 80 percent chance of rallying the next day. If the trin closes below 0.60, the market has an 80 percent chance of selling off the next day
39
What's the $TRIN equivalent for Nasdaq stocks?
$TRINQ
40
What are the 3 PC ratios generated during the day?
Equity - generally very low. Reflects a retail crowd that tends the favor the long side Index - generally very high. Reflects institutional mind-set that stays hedged against any unexpected lower moves Combined - reflects behavior of both. That's why we watch this one
41
What's the 1st rule regarding PC ratio?
If the combined equity/index PC ratio reaches over 1.0 intraday, I’ll ignore all short setups and start looking at long setups
42
What does a PC ratio over 1.0 represent?
Extreme bearishness and put buying. Places a floor on the markets. Markets have fallen for many days in a row. bad economic data
43
What's the 2nd rule regarding PC ratio?
If the combined PC ratio falls under 0.60 intraday, I’ll ignore all long setups and start looking at short setups
44
What does a PC ratio under 0.60 represent?
Extreme bullishness and call buying. Places a ceiling on the markets. Markets have rallied for many days in a row. good economic data Because of people chasin...many times a market will continue rallying until the PC ratio gets under 0.60
45
What's the 3rd rule regarding PC ratio?
If the market is rallying, I want to see the PC rallying to confirm the move. If the market is falling, I want to see the PC falling to confirm the move
46
What Is the Most Effective Way to See What’s Really Going on in the Stock Market During the Day?
The sector sorter list (SSL) - all key sectors auto sorted every few seconds by net pct change what’s going on “beneath the indexes.” tells us at a glance which sectors are leading the markets higher or lower
47
What's the 1st rule regarding the sector sorter list (SSL)?
Any move without the banks (BKX), brokers (XBD), and semiconductors (SOX) is suspect and most likely won’t last
48
What are the 3 reasons observing sectors is important?
The giant money-center banks (BKX) represent the biggest market capitalization sector in the market Brokers (XBD) are a great market proxy. As go the brokers, so go the markets Everyone participates in the semiconductor stocks. (SOX) They have a strong following among retail and institutional investors a like Any incline/decline with these three sectors leading the way, we're confident is gonna last
49
What's the 2nd rule regarding the sector sorter list (SSL)?
During these quiet periods in the market, the more sectors that go red, the greater the odds are that, when the market finally does break, it will be to the downside. Conversely, the more sectors that go green, the greater the odds are that, when the market finally does break, it will be to the upside
50
What are the 9 sectors to follow on our sector sorter list (SSL)?
``` XLY (Consumer Discretionary) XLF (Financial) XLB (Materials) XLP (Consumer Staples) XLV (Health Care) XLK (Technology) XLE (Energy) XKI (Industrial) XLU (Utilities) ```
51
What tool helps us identify choppy days as early in the day as possible? And what's the general rule?
5 min chart E-mini S&P 500 futures, only volume, line drawn as close to 25k lvl as possible If the first six bars on a five-minute ES chart have most of the volume at or well under 25,000 contracts, expect a choppy, tight-range session. If the first six bars on a five-minute ES chart have most of the volume at or well above 25,000 contracts, expect a more volatile session with better trends Have setups to match
52
What is the "carry trade"?
Hedge funds borrow low-interest currency, buy appreciating assets in order to make big returns and collect big fees
53
Why is the "carry trade" so important?
when funds are putting risk on - most asset classes rise in value More important - when funds are taking risk off - NEARLY ALL asset classes sell off it explains what many people find unexplainable
54
How to we observe the "carry trade"?
$AUDJPY moving higher = risk on = assets rise, buy everything $AUDJPY moving lower = risk off = assets fall, get outta the way

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