Wednesday, April 22, 2015

ADX Divergence...04.22.15

Another screwy day for us technical traders as the algos played dirty at the open before rallying in the afternoon session.  With over 150 companies reporting earnings this week you can't blame traders for their rampant displayed in the wild intraday swings we've seen lately.  In an effort to try and find some transparency (and edge) in this narrow range environment I was looking at how the ADX has reacted to April price action.  The results are shown below and are actually quite illuminating.  The ADX, as most readers probably know, seeks to define when markets are trending, as opposed to consolidating.   Per the linked artcile, ADX readings less than 25 are associated with very weak or non-trending markets.  For the month of April we've seen the ADX steadily erode from 24 to a current value of price has diverged to the upside.  The net conclusion is that this is a dangerous market, (does that sound familiar?) so my recent focus on containing risk and avoid capital drawdowns may be more understandable.