Daily Stock Market Equity and Options Trading Commentary

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Friday, April 10, 2009

The Market Was Up but I was Down... Where's the Heat?

Ever wonder why your portfolio is down on an up day or vice versa (most of the time when we're up on down days we are just thankful and don't worry about why..)? A great way to explain this is to see where the money is moving in the market. An easy way to do this is to look at a heatmap, which is why I decided to blog about them. Heatmaps are used to see where the "heat" or where the hot stocks are in the market. My heatmap is from Options 360 and breaks it down by index. The first heatmap picture is below. This was as of market close April 8, 2009 (click on images for a bigger picture).

This particular map shows stocks over a 1 week period and where the money has been moving in the market. The bigger the area the bigger the stock market cap. The brighter the color the higher/lower the stock has traded and if the box is black it is neutral (in terms of %). The percentages are defined from the heat bar below.If we look at the top left box we see it is black. This is Microsoft and as of April 8 it did not change greater than 1% in either direction (for the past week). The next heatmap below is as of market close April 9.

As we can see from this heatmap, 1 day can make a big difference. Microsoft is now the fourth shade of green finishing the 1 week period up 4.91%. This is a great way to see where the money is moving in the market. Many traders use heatmaps on a week to monthly basis, where very few use them for less than a week.

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