The Daily Routine

Q: What is your daily analysis routine?

A: My daily analysis routine involves a top-down approach. First, I check the intermarket charts to see what’s happening with the S&P 500 (SPY), bonds (TLT), gold (GLD), oil (USO) and the Dollar (UUP). With a wide array of ETFs available, I can follow almost anything in real time through Stockcharts.com. In fact, I am continuously checking my custom market summary page throughout the day. Sharpcharts subscribers can view a market summary page based on your favorites lists by selecting “summary” for the format (see green box below). The image below shows a snapshot from one of my favorites lists, which is called mailbag. Users can also choose between end-of-day change or intraday change.

Once I have checked the intermarket picture, I then read through various websites for relevant news and analysis. I am continually referring back to the charts and taking notes as I read. Taking notes and writing down key points is an important part of the process. Next, I begin my daily chart routine by looking at the major stock index ETFs in the US, Europe, Asia and some key emerging markets.

Because my analysis is focused on US equities, I then look at a number of key indicators for the US stock market. These include the advance-decline ratio, the up volume-down volume ratio, new 52-week highs, new 52-week lows, overall volume, the $VIX and the $VXN. This is like looking under the hood to see how the engine is running. Big moves without corresponding breadth can be suspect. Big moves on big breadth are often sustainable.

From here, I then dive into the sectors to see which ones are leading and which are lagging. Relative strength in the offensive sectors, such as technology and consumer discretionary, shows confidence. Conversely, relative strength in the defensive sectors, such as consumer staples and healthcare, reflects risk aversion. At this point, I am ready to hit the individual stocks. First, I look at the most active lists and then scroll though a database of key stocks. Note taking is an important part of this process. At the end of this process, I then review and organize my notes to develop a forward strategy.