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Indices Relationship With Members (Components)


tradingsydney

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Hi Everyone,

I have been trading indices for nearly 2 years, while I find them very difficult to understand at times, they could be smooth and easy at other times. I usually trade candlesticks combined with volume, bollinger bands and moving averages and considering how the members  shares are going.

What I can't understand is that components are massively in the red in bulk, however the index in question is rallying with no hesitation whatsoever. Take Japan for example, members were 98% in the red, but the actual index rallied 280pts since the market opened.

Can someone explain this to me please?

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The best example I heard to explain this is the following... "Think of it as a whole load of people on one side of the boat. It doesn't take much for it to flick over." If sentiment is that extreme (in this case short) then a small movement up will take out the very close stops which then all become buys and then the next level of stops are taken out which become buys etc. Result is a very rapid move in the opposite direction. Often seen at turning points.

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    • If its going to work there's not too much faffing, it'll faff if the 50% level is not working - which is happening right now on GOLD On the daily chart a stop of 25 points for the SP500 is fine
    • Yeah had fairly tight stop and it was a bit choppy so got knocked out. Uncorrelated methods will work together as you say. 50% levels will work while the trend is still on but when/if that stops so does the method I would imagine and you have to do something different.
    • EUR/USD rallies as GBP/USD and USD/JPY struggle A break higher for EUR/USD contrasts with continued weakness for GBP/USD and USD/JPY. Source: Bloomberg   Forex United States dollar EUR/USD Euro USD/JPY GBP/USD  Chris Beauchamp | Chief Market Analyst, London | Publication date: Thursday 09 December 2021 EUR/USD breaks resistance EUR/USD has succeeded in breaking higher, pushing above trendline resistance yesterday. Gains however have stalled for now at $1.133, as they did at the beginning of the month. Broader upside would require a move above $1.135, but the longer-term downtrend remains in place. Source: ProRealTime GBP/USD continues to struggle Unlike EUR/USD GBP/USD remains under pressure, hit by changing expectations of a UK rate hike and the return to some Covid-19 restrictions. The yawning gap between the price and the 50-day simple moving average (SMA) above $1.35 refuses to close, and so far there looks like no sign of a move to the upside, which would require at least a move back towards $1.33. Source: ProRealTime USD/JPY edges lower Gains with USD/JPY have stalled at ¥113.60, as the price retreats back below the 50-day SMA. This drop will need to move below ¥113.00 to indicate the sellers are back in control. Alternately, the bullish view is revived with a move back above ¥113.80. Source: ProRealTime
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