How To Use Three Market Indicators With Acuity

It’s about that time again to write an educational post that explains something that I do when I trade in order to “one up” the market.  Tonight’s focus will be on three market indicators and the deadly trading pair I’m sure we’re all familiar with: Direxion Financial Bull 3X Shares ETF (FAS) and Direxion Financial Bear 3X Shares ETF (FAZ).  If you haven’t noticed already, I’m a fan of this particular ETF/iETF pair because they are normally easy to track.  When FAS is going up, keep your eye on FAZ in order to catch the swing from long to short, bull to bear.  Simple, right?

Wrong.

With today’s sporadic, volatile, and inconsistent market, patterns can change at any given time and at any given rate.  You may feel like you can’t keep mistiming your exits and missing your entry points, and you might also feel like you can’t trade during this trading atmosphere.  If you run into problems and feelings like these during your trading, it may be time to master the market indicators.

We all know about the VIX (^VIX) and the “one up”-age that it brings to a trader, and although I use this market indicator as well, I’m going to concentrate on broadening your trading horizons with these three different market indicators that fellow traders sometimes pass over.  These indicators I’m talking about are $TRIN, $UVOL, and $DVOL.

Almost all of us are familiar with $UVOL and $DVOL, for they give us the Advances/Declines in the total volume for the trading session.  When I sit down to trade, I bring up the $UVOL and $DVOL and view their charts on an Intraday, 5 Minute set up that is used to easily delineate the possible candle patterns that may be occurring during the day.  In order to visualize this a little easier, $UVOL and $DVOL  are outlined in their intraday charts from today down below:

$UVOL  Intraday, 5 Minute

$DVOL  Intraday, 5 Minute

Within $DVOL’s chart, there are 5 opportunities for bulls to get in a jab or two on the bears.  From these opportunities, 3 out of the 5 are prevalent on $UVOL’s chart; one at 11:30am, another at 1:05pm, and the last at 2:30pm.  3 of 5 isn’t too bad, considering that 60% of the times you could have taken advantage of tiny bullish movements were rather large in relation to today’s volume: 34,143 in an average volume gain for those 3 opportunities on $UVOL, which equates to about 28% of the total up-volume amount at the close (120,939).

Although these market indicators are good to look at when you want to check the overall position of the market, how do these market indicators tell me when to buy and when to sell?  Intraday charts of FAS and FAZ will answer this question for you:

FAS  Intraday, 5 Minute

FAZ  Intraday, 5 Minute

Through the pinpointing of the $UVOL/$DVOL action, we can now pinpoint the time of day that FAS will make a push higher and FAZ will make a push lower.  This trick is normally used for short-term stock/ETF/iETF tracking, and in order to make an accurate volume-based buy or sell throughout a regular trading day, you will want to also concentrate on price-to-volume convergence and divergence patterns on a longer time basis (10 days, 20 days, etc.).

The final market indicator that normally gets bypassed is $TRIN.  I rarely hear traders discuss the action in $TRIN, but the action is very, very important.  $TRIN is the NYSE’s Short-Term trade index, and for the most part, it tracks who is shorting the market and who isn’t.  When $TRIN increases, the market is moving in a bearish direction.  When $TRIN decreases, the market is moving in a bullish direction.  An intraday chart of this market indicator is provided in the chart below:

$TRIN  Intraday, 5 Minute

Based upon the principles of using $UVOL and $DVOL in order to pinpoint entry and exit times for FAS and FAZ, $TRIN allows you to witness another market indication of entry and exit points.  With the confirmation from $UVOL, $DVOL, and $TRIN, FAS and FAZ can be easily tracked through choppy markets and make you a good bit of coin if you can be patient and observant.

Don’t get trigger-finger syndrome; sweat it out and read your patterns correctly!

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