Wednesday, September 13, 2006

Market Psychology AM Update for 9/13/06

10:36 AM CT - Very much a range bound market to this point. We finally got that move to AM highs above yesterday's highs after a local-driven shakout; we need NAZ, ER2, and TICK in upside gear to sustain those new highs. Have a great rest of the trading day.

9:45 AM CT - The erosion of the NAZ and ER2, along with the weakening volume at offer vs bid prevented the ES from breaking those highs. Always a danger sign when you see huge offers act as a brick wall to a rise. We're back to targeting that average price for the day if we take out the early AM lows. Off to do some work with traders; update tonight on the Weblog. Have a great day.

9:30 AM CT - Big offers holding market down at that 1325.5 level. Need to see good buying take those out to get the anticipated new highs. Lots of jockeying among locals here.

9:22 AM CT - Market trying to make a bottom at 1324 area. Watching order flow carefully.

9:16 AM CT - Not too much has changed; the TICK distribution remains positive, despite some resistance at that 1326 level and some recent TICK weakening. Russell and NAZ looking a bit heavy here. I'm watching carefully to see if selling dries up here or accelerates. As long as we stay above the early AM lows with a positive TICK distribution, I'd expect to take out that 1326 level and test the recent bull swing highs at 1327.75. A break below the early AM lows targets that 1320 average price from yesterday. The MDY trade worked out fine; I'll report on my Odds Maker work on my personal site for the next couple of days.

9:02 AM CT - Clearly the IWM short did not work out; in general, I hate taking trades that early in the session, because I don't yet have a good feel for who's in the market, how volume is distributed, etc. Odds Maker allows traders to filter that out. We got drying up of buying at the 1326 level in ES and that would have been a discretionary point to take profits on the MDY long trade. That one closes out at 9:12 AM. I'm going to work further with Odds Maker to refine signals and their timing before doing anything further in real time.

8:51 AM CT - Solid volume, volume at offer exceeding volume at bid for ES, and a positive TICK distribution. Similar to yesterday. That's why you'd take buy setups short-term more seriously than sell ones. We're getting that test of ES highs from yesterday; let's see how the volume distribution breaks down as we get up there.

8:42 AM CT updated 8:47 AM CT - Buy signal 30 min hold in MDY from Odds Maker 137.65; unfortunately Blogger problem prevented me from getting out quicker. Again for observation only. The IWM trade flew in the face of order flow, which supports my idea of filtering these trades for how the market is actually handling volume and orders at the time.

8:40 AM CT - Early volume decent, less strong so far than yesterday. Pretty flat in advance decline ratio; TICK a bit on the positive side. So far, nothing to dissuade me from an eventual move to test yesterday highs. I'll let the Odds Maker signal play out for observation only; close out at 9:02 AM. Given the positive TICK thus far, it's not a signal I would normally take.

8:32 AM CT - 30 min sell signal in IWM from Odds Maker 72.17.

8:20 AM CT - If you haven't yet read the blog entry on sport psychology and trading, I'd like to (humbly!) recommend it. I think the ideas are important. As the update noted yesterday, we had an uptrend day yesterday on the heels of the breakout move, and recognizing that early was a key to taking a little money out of the market. The odds are in favor of us taking out yesterday's nearby high of 1326.25; we're also looking at resistance at the 1327.75 area. The overnight range has been muted, and the VIX is back to below 12, so it would not be a surprise to see slow, range bound action. The first upside target is the 1325 area; to the downside, we have the overnight lows around 1323 and the 1320 average trading price from yesterday. Catching early strength/weakness for tests of these levels can frame early trades. I'll be watching for the Odds Maker setups. Back in a little while.

8 comments:

EddieFl said...

Hi Brett,

Still fairly new to the Traderfeed, but I see you are trading the 30 minute charts. Is this a time frame you found to be most profitable with your new system or is this just where you are more comfortable.

As you have stated before, the importance of selecting a time frame in the markets is crucial. a time frame that suits your personality. Right now I am on the 5 and 10, the 1 and 32 minute was not suited for me. And yes,, my trading has improved significantly with the new time frames.

thanks,

Brett Steenbarger, Ph.D. said...

Hi Eddie,

Sorry for the confusion. The trade setup from Odds Maker had a 30 min stop. I watch order flow from 1 and 5 minute Market Delta bid-ask footprint charts and from the bids and offers in the order book. I don't trade 30 min charts. Actually, I don't trade charts at all.

EddieFl said...

Oh, ok, I see. Thanks for the clarification. Yes, I have seen time-frame stops work well before.


thanks,

Eddie

Brett Steenbarger, Ph.D. said...

Yes, one nice thing about the Odds Maker program is that it allows you to tweak the time-based stops (as well as price-based ones) and gauge the impact on profitability. Thanks for the opportunity to clarify.

John Cook said...

Brett,

You mentioned you don't look at charts to trade. Do you trade strictly from the Market Delta footprint charts? I see that you use a lot of market profile terms do you use those charts as well?

Thanks,

JTC

Brett Steenbarger, Ph.D. said...

Hi JTC,

I do conceptualize aspects of the market (and trade ideas) with Market Profile. I find that the histogram volume display on the Y axis of the new Market Delta program is helpful for that, although an actual Market Profile display is integrated into a version of Market Delta.

BTW, early in 2007, Jim Dalton is coming out with an excellent new book on Market Profile and auction-based trading ideas.

Brett

EddieFl said...

Brett,

That is interesting, I plan on taking a look at that book when it come out.

By the way, your site is great, the articles and updates are numerous and on the money. Good stuff.

thanks,

Brett Steenbarger, Ph.D. said...

Thanks; I appreciate your interest and support.

Brett