With high frequency trading/algorithmic trading now dominating much of the intraday price movement in the major US indexes, it’s become increasing necessary to look at more than the price of an asset to help determine what is really going on in the market. Today is a great example: a much worse than expected September jobs report is released, the S&P 500 almost immediately drops 30 points or 1.6%, only to rally by 40 points and turn positive by 10 points on the day 2 hours later. What changed economically? Nothing.
However, there are ways to measure the sustainability of a price move, whether it’s up or down, by looking at non price-related data — which we have been relying on more and more recently to try to look past these wild and confusing intraday market swings.
Click the link to view this Research Excerpt and 2 accompanying charts.