Friday, August 25, 2006

Market Psychology Update for 8/25/06

9:30 AM CT - I'll be out for the rest of the day; have a great day. I'll be posting here and to the Weblog during the weekend. Notice how the 9:15 AM high in ES was *not* confirmed by either NASDAQ 100 or Russell futures, and notice how it occurred on lower volume, lower NYSE TICK, lower buying at offer, etc. Sure enough, that brought sellers in, creating one of those nasty reversals mentioned earlier. Hope this is helpful to you in terms of reading markets. Remember, a breakout from a range that comes back into its range has a high probability of touching the midpoint of that range. Yesterday's midpoint was 1297.25. Keep an eye on volume; if it dries up (as I think it will as we proceed toward afternoon) opportunity will likely be diminished.

9:05 AM CT - Blogger has been down this AM. I had an earlier post that didn't go through, but included it below nonetheless. The model reported in the Weblog so far has anticipated some buying strength, with a positively biased TICK leading the way. Volume has expanded to the upside, with large traders so far leaning that way. This puts us on track to test yesterday's highs; we'll want to see if volume--especially at the offer--expands on any such test. Remember, low volume is a local dominated market and that can lead to sharp reversals of moves.

8:55 AM CT - I'll be breaking early from trading today for a long weekend, but will update during the early AM. Volume is well below average, as might be expected for a late summer Friday. That immediately alerts us that the odds of getting large trending moves are reduced. It's also important to set profit targets more reasonably, given the anticipated lower volatility. In terms of volume at bid vs. offer for ES, it's pretty even, but there is some strength in the NYSE TICK, which has aided the Russell in very early going. The model reported in the Weblog entry for today showed a bullish leaning, but I'll need to see some decent setups to jump aggressively into this market.

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