While many people trade multiple markets or multiple stocks, when I am working on a very short timeframe I feel more comfortable concentrating on one. But that doesn’t mean that I ignore all the rest. On intraday moves, my market (the Russell 2000) sometimes leads the others, and recently it has been lagging. But overall, your best trades will occur when the markets are moving together.

How can you keep an eye on other markets without becoming distracted from your own? My solution is to standardize my charts so the important things stand out. I use two monitors during the trading day, but that doesn’t mean I am limited to two screens full of data. With a mouse click I can bring up a general market layout to see what is happening elsewhere in the trading world.

Markets

First the standardization. On my markets page each of the six charts has a green line showing yesterday’s high, a red line for yesterday’s low, a thin blue line at yesterday’s close, and two moving averages. All six of the charts are linked, so by simply typing in a number (3, 15, etc.) they will all switch to a different timeframe. The bars are color-coded (see Dunnigan post) so I can instantly see the direction of the last bar. And in the bottom pane is a modified MACD to show the overall trend.

In addition to the major futures markets (NQ, ES, and YM), I have a chart for the semi-conductors (SOX) and the two parts of the S&P 500 (the large cap and mid cap sections.) Although this is a screenshot from the end of last week, look at the information available at a glance.

The DOW futures (lower right) are above yesterday’s high (green line), while the midcaps (upper center) are still trading below yesterday’s low. All the other charts are inside yesterday’s range. Quite often, just watching the OEX and the MID charts, you can get a feel for the strength of a rally or decline. If they are moving together, there is momentum. If they are fighting each other, there is more likely to be congestion.

Seeing how price and the two moving averages are acting gives you another clue to trending or non-trending motion. Notice how easy it is to see that the SOX are the most congested at the present moment.

On a shorter timeframe, look at the colors of the last few bars. The mid-caps are rallying — trying to catch up (many green bars), while the other markets are going sideways (magenta or alternating red and green bars.) And the MACD at the bottom is oscillating in smaller and smaller moves as option expiration day expires in a sideways motion.

I keep this chart hidden to avoid being distracted from my interest in the Russell, but when I’m trying to get a feel for the markets, or just before initiating a trade, I’ll take a quick look at these charts. Never for signals, but for the context to know what to anticipate from my own trades.

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