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We all seek a leading indicator that gives advance notice of what the market is going to do next. I have been watching the interaction of JNPR (Juniper Networks) and the June Nasdaq futures contact. At several key turning points in NQ M2, I see that JNPR is already leading the way, giving advance notice of what the NQ M2 market will do next. Permit me to share with you a three day sequence in comparing both charts using 5-minute intra-day bars.
On Monday, NQ M2 formed a wedge from the open until 12:00 (noon Central time). The question in the minds of NQ traders was whether the breakout from the wedge would be up or down. The JNPR chart was steadily lower all morning serving as an advance indicator that NQ would be going DOWN and not up.
On Tuesday, JNPR and NQ M2 both rallied until 10:30. NQ M2 put in a new high at 11:05, but JNPR did not. This is a first BIG clue that the 11:05 top in NQ M2 was going to be the daily high. At 14:10, NQ M2 was pushing higher for a possible retest of the 11:05 high, but JNPR was definitely in a downtrend. JNPR's 14:10 rally was nowhere near its mid-morning high. Again, JNPR served as an advance indicator that the NQ M2 retest of the high would fail, and NQ M2 would go lower.
Wednesday opened with a sharp sell-off in both JNPR and NQ M2. They both put in lows at 9:35. NQ M2 put in a new lower low at 10:30, but JNPR found support and did not put in a new low. Again, JNPR gave advance notice that the market would not continue lower. See the divergence that is marked on this chart. From the 10:30 lows, both JNPR and NQ M2 experienced significant rallies.
Have I found the crystal ball for NQ in the form of JNPR? I doubt it. Useful correlation found (with the benefit of hindsight) on three charts is not statistically sound. However, the trading tip being taught is that an individual stock may respond a bit quicker than a composite index. JNPR is a heavily traded Nasdaq stock, and I am seeing useful correlation where the e-mini Nasdaq future follows the direction set by JNPR. At least in the three day sequence documented in this article, JNPR was a worthy leading indicator. There was significant divergence at three key turning points in comparing JNPR behavior at these tops and bottoms with the NQ M2 behavior. NQ M2 followed the JNPR lead either higher or lower. When NQ M2 tried to go higher but JNPR was going lower, NQ M2 turned around and went lower. When NQ M2 tried to go lower, but JNPR would not follow lower, NQ M2 turned around and went higher. This is just the type of leading divergence indicator sought after by analysts who use studies to show confirmation and divergence.
Overlay History:
In the past users creating custom symbols with Setup | Custom Symbols form would often have a simple spread or ratio, and yet lack having any back history. If the same formula can be expressed in our Overlay study to do the spread or ratio, then you will now be able to get some back history. Create the overlay, and when it displays it makes the calculations by loading the chart files and syncing the data bars. Ensign Windows has the answer because it plots the spread or ratio on the chart. The feature added was to automatically write the spread or ration calculations out as an Ensign chart file. The file written will always be the name Overlay, with the chart time frame for an extension, in the same folder as the source data, such as C:\Ensign\Minute. You can use Windows Explorer to rename the Overlay file to be the symbol you use for your custom symbol. And then viola, you have some back history for your custom symbol chart. Last modified 8/11/08 10:52 AM |
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