https://reddit.com/link/1u82xg0/video/vtn62rqmks7h1/player
Hi guys,
Full time trader here. I just wanted to share some practical tips on how to build situational awareness and get a better feel for the market sentiment overall. Hope it helps!
**1. Look at the sectors**
In general each of the 11 primary sectors will hold a couple hundred stocks. It can be very helpful to monitor how many of those stocks in each sector individually are trading above or below the 50MA and how much in terms of percentage. You can also look at the overall # of stocks up or down for the day/week in each sector. This gives you a health indicator.
**2. Be aware of the VIX**
The VIX is extremely important and will shoot up during times of excessive fear in the market or just high volatility caused by other factors. Ideally we want to see the VIX below 15, and if it is above 30, that is a very big sign the market is telling you to not do anything.
**3. Monitor the QQQs**
Most of the capital in the market is captured by the QQQ so I like to look at that. This is a great proxy to get a feel for the market. If it is bullish and surfing the 10/20 that's a great sign we're in a strong, healthy market. But if it breaks the 20 and/or 50, it's time to be cautios or get out and sit in cash entirely.
**4. Look at the IWM**
When it is 'RISK ON' for institutional investors, you will generally see money flowing into the more speculative stocks and those will often be small and midcap stocks. That's why looking at the Russel2000 is a smart thing to do, since a bull run on the IWM indicates that the really big boys are ready to diversify and play.
**5. Put it all together**
I've tried many methods and the above is what worked best for me. I've also transferred this 'logic' into my own methodology as explained in the video. The goal is to keep it simple and to look for what is objectively happening, not what you think is happening based on all sorts of vague assumptions that can't be measured.
Hope this helps. If you have any questions happy to help.