I have recently written a program which will allow me to plot multiple securities on the same plot in percentage terms for comparison sake. I trade primarily ES and NQ. My question is what other securities would you find most beneficial to watch to gain additional insight into these two markets? I see three distinct categories to watch, each with their own benefits. If you could only choose one of the following which would it be?
1) Bottom Up - Underlying Stocks
Watch the top ten stocks in each index. The benefits here are spotting similar patterns, confirming S/R breaks across a number of components, etc. Also you know that moves in these heavily weighted stocks will have a direct impact on the index.
2) Side to Side - Sector Indices
Watch all sector indices making up the main index. The benefits here would be spotting the breadth of the move across sectors or spotting how contagion between sectors can spread. The potential drawback to using these indices is that you are not capital weighted so without memorizing the weighting of these sectors relative to the larger index it is hard to judge their impact on the larger index.
3) Top Down - Multiple Markets
Watch multiple markets such as bonds, currencies, key commodities, etc. The benefits here is seeing the whole monetary picture, where the hot money is flowing that day. If you know what to look for this can be very important. The potential drawback here is that correlations decouple all the time and those old standby sayings you use to keep the macro economic relationships straight can be painfully inadequate at times. You've got to know what you are doing.
I'm hoping this can spark some interesting conversation on what us elitetraders find to be the most important relationships in the market. As a minor compensation for sharing your thoughts I've attached a text file I compiled of all the most useful indices IB has available. I hope you find it useful. Thank you.
1) Bottom Up - Underlying Stocks
Watch the top ten stocks in each index. The benefits here are spotting similar patterns, confirming S/R breaks across a number of components, etc. Also you know that moves in these heavily weighted stocks will have a direct impact on the index.
2) Side to Side - Sector Indices
Watch all sector indices making up the main index. The benefits here would be spotting the breadth of the move across sectors or spotting how contagion between sectors can spread. The potential drawback to using these indices is that you are not capital weighted so without memorizing the weighting of these sectors relative to the larger index it is hard to judge their impact on the larger index.
3) Top Down - Multiple Markets
Watch multiple markets such as bonds, currencies, key commodities, etc. The benefits here is seeing the whole monetary picture, where the hot money is flowing that day. If you know what to look for this can be very important. The potential drawback here is that correlations decouple all the time and those old standby sayings you use to keep the macro economic relationships straight can be painfully inadequate at times. You've got to know what you are doing.
I'm hoping this can spark some interesting conversation on what us elitetraders find to be the most important relationships in the market. As a minor compensation for sharing your thoughts I've attached a text file I compiled of all the most useful indices IB has available. I hope you find it useful. Thank you.
