There are a number of different ways that you can measure what we call the “market tone.” Market tone is one of the three legs of the TRADEway Trading system.
We have a three-leg table, which consists of market tone, fundamentals, and technical analysis. Market tone, for us, is about what the S&P 500 is doing. And then the news, and how it is going to impact the potential market for that particular time period whether we’re talking about today or this week or maybe out in the future over the next several months.
At TRADEway, we focus specifically on the S&P. It's 500 of the best stocks, and that's what we use to determine, generally, what we think the market is going to do for that day. There are always going to be stocks that move counter to what the S&P is doing, but, for the most part, you can think of the S&P as a tidal wave; if the wave is crashing into the shore most surfers or people out there on their floats or paddle boards, are going to be moving with the wave. In the same way, most of your trades are going to move with the market.
So what we're trying to do is focus in on the S&P. How is that likely to impact the individual trades that we're making? If we can hone in on those two things, that can help make us a better trader.