Wednesday, December 20, 2006

A Context For The Market Open


Good morning, all. Thought I'd post a screen shot of what I watch to prepare for the market open. Notice that my Market Delta screen is set for 10-tick bars, which means that we form a new bar every time there's a ten tick move in ES. This enables me to see how the pre-opening morning trade compares to how we were trading in the afternoon. You can see clearly that we're trading above yesterday's value region (area with the most volume on the left hand Y-axis) and point of control (1434.75). Notice also how buying dried up as we tried to take out yesterday's afternoon highs, pulling us back into the preopening trading range.

My basic strategy for a first trade of the day is to see how we trade in the opening minutes and especially how the NYSE TICK distribution looks and whether or not we're seeing net buying or selling among large traders on the Market Delta chart. Once I get a handle on that, I'll get into the market for a move to break the preopening range. My research from the Weblog tells me to be alert for a consolidation of yesterday's reversal move, so I'm not assuming we're going higher just because we had good afternoon buying yesterday. Indeed, if we get buying that can't push us above yesterday's highs (and the overnight highs), I'd be a seller in the AM.

Have a great trading day--

Brett

5 comments:

Jozef Barunik said...

Hi Brett !
Thank you very much for giving us your view of the market, I'm watching your blog and also webpages for updates quite a while and everytime I visit your pages, I find some interesting ideas which I try to develop and study more.
As I would also like to help, I post an interesting reading. I found http://www.smallinvestors.com/ where plenty of statistical analysis is published. I did not have a chance to go through everything, but it seems that they explore and test simple ideas that might be helpful for uncovering the market patterns. i.e. here they explore NYSE Tick you are using http://www.smallinvestors.com/SP500/TickNyse.htm
Thank you again, I really appreciate what you're doing.

Have nice day
PhDr. Jozef Barunik

Brett Steenbarger, Ph.D. said...

Thank you very much, Jozef. That sounds like a very promising site; I will definitely check it out and link on my personal site tonite. I appreciate your feedback--

Brett

Anonymous said...

Hi Brett,

I read the smallinvestor.com site. It looks interesting.

Regarding the Tick; I have a lot of trouble trying to use the Tick over a long period. It works best for me intraday where I can see if the trend is buying or selling and if big players are moving things. What do you think?

Marc

Brett Steenbarger, Ph.D. said...

Hi Marc,

I crunch the one-minute TICK values into a single daily figure and use that for my longer-term analyses. I find that to be helpful, but it *is* a different use from the one you mention, which is to detect real time buying/selling pressure. Thanks--

Brett

Joshua said...

Hi Dr. Brett,

I know this post is ancient in blog years, but I just wanted to point out a potential source of confusion for the future. Without clicking on the graphic and looking at the times posted for each bar, one might think you meant 10 transactions per bar as opposed to a $2.50 range bar.

Josh