Monday, January 29, 2007

Monday January 29th Morning Comments

9:51 AM - There's no way I'm shorting this market again with TICK readings staying positive and ER2 continuing to show relative strength. If anything, I'd be looking for TICK pullbacks as places to by ES for a move back toward Friday highs. I'll post again if I see anything major; otherwise have a great rest of your day. Market wrap up tonite on the Weblog.

9:45 AM - OK, let's wrap up for this AM. I started the day with an eye toward the Friday average price, skeptical of any moves away from that level. We got early buying in ER2 and DAX, but underperformance in semiconductors and NQ. That was my first clue that the buying would not be sustained. I took an initial small short position, because TICK was still positive and ER2 was still making new highs. In retrospect, I probably jumped the gun and should have waited for ER2 to stop making new highs on TICK bursts. Anyway, I kept the loss small on that trade--under a point--on the small position. Keeping losses small gives you a chance to be green on the day. Then we got some selling across the board, though not dramatic, so I waited for the next TICK burst that couldn't push ER2 and DAX to a new high. That had me going short with greater size to take advantage of a move back toward the Friday pivot. We hit that level, I waited to see if we'd get follow-through selling, we didn't, and that was my trade and, quite possibly, that will be my morning. Notice how important position sizing, risk management, and clear profit targets are to short-term trading. This is a pretty typical day for me. Not at all exciting. I have one decent idea and execute it decently. My only questionable move was getting short with the small position as early as I did. Not a good idea to try to call highs; wait for the selling to show you that a high has been made. Even on profitable days, there are always lessons to be learned and drilled into the (thick) skull! I'll post once more this AM.

9:35 AM - We hit my first target, the pivot, so I took some profit off the table, esp. in light of ER2 holding up relatively well despite the obvious downward shift in the TICK distribution. Note we've yet to see any solid selling sentiment in TICK and volume at bid in ES has been moderate.

9:27 AM - Adding to short positions on TICK surges that can't produce new highs.

9:17 AM - I continue to be unimpressed with the price follow through in ES and NQ, though small caps have been strong and there's been net buying sentiment. I'm basically waiting for weakness in ER2 and TICK to go short again in ES for a move back down to that avg price from Friday.

9:08 AM - Buying in the TICK has been persistently high, meaning that a short trade even if well timed is good only for a scalp. Took small loss on my short. Nice pop in the DAX. We'll need to see evidence of sellers coming in before jumping to the short side for more than that scalp.

8:56 AM - I have a small short on ES on that last TICK move up. Let's see if we break out or move back toward the average price.

8:51 AM - Volume is definitely coming in on the buying and you can see the moves start first in ER2. TICK hit quite an extreme, as we work off the excess negative values from Thursday. Note relative weakness in semiconductors so far. Also NQ did not make new AM highs on the recent thrust; worth watching.

8:46 AM CT - Note we've taken out Friday highs in ER2. I'll be watching to see how prices hold up on pullbacks in the TICK. If we hold above the Friday pivot, it makes sense to buy ES for a test of Friday highs. If selling comes in with some size before we can break Friday highs in ES, I'd be looking for a move back toward that average price. So far, we've seen no selling of consequence in TICK and we're seeing more volume at offer than bid in ES, with a nice volume pop on the upmove.

8:42 AM CT - As long as DAX and ER2 show new AM highs, I'm not going to short the large caps; notice how the pop in ES was preceded by the DAX and ER2 strength, taking us toward a test of the resistance.

8:36 AM - Got some initial buying in ER2 and follow through buying in DAX, but sellers were waiting for the pop. So far no distinct buying or selling sentiment, with declines leading advances by about 50 issues, volume moderate in ES, and pretty even volume at bid vs. offer early on. Watching carefully to see if bulls can succeed in getting us past the earlier mentioned resistance.

8:24AM - No major economic reports today, as we gear up for the Tuesday/Wednesday FOMC meeting and Friday's unemployment report. We're seeing some resistance around 6715-6717 in the DAX (cash) in pre-opening trade, and the 1430 area represents afternoon resistance in ES from Friday's trade. I will be watching carefully to see if morning buying can break those levels. If not, I expect moves through the Friday Pivot/VWAP and the Friday lows. Pivot levels for the day are in the most recent Weblog entry; also check out the summary of how I trade intraday in my latest Trader Performance entry. Basically, I'm going to view with skepticism moves away from the Friday average price, making the market prove to me that it can sustain buying above 1430 or selling below 1422. Otherwise my leaning will be to fade moves that cannot generate an increase of stocks making new highs/new lows. Let's see how early volume looks; as I mentioned recently, that helps me figure out the odds of a range bound market.

4 comments:

Anonymous said...

What a great recap of the morning market activity. I find it interesting that we were on opposite sides of the market most of the morning and still both made money.

I guess that shows the importance of have a perspective, keeping risk small and having defined profit objectives.

Brett Steenbarger, Ph.D. said...

Hi Lord Tedders,

Yes, I'd say, overall, going with the volume and TICK for the upside has made the most sense this AM. You're right that keeping to your perspective with good risk mgt is all important. My research told me the odds of hitting the Friday pivot were very high, so that's what I went with. But a good tape reader had plenty of opportunity to buy the Russells and make a dollar! Thanks much--

Brett

Anonymous said...

Yeah, I find it interesting that the average trader is very concerned with which direction the market is going. I just try to stick with my methods.

BTW I just ordered your latest book. It looks like it will be a good read. I'll be sure to post a review on my blog when I'm done.

Brett Steenbarger, Ph.D. said...

Hi Lord Tedders,

I appreciate that. Please send me the URLs for your blog posts that you think might be of interest to TraderFeed readers and I'll be happy to link on my personal site. My email address is in the info on me on the blog home page and in the bio page of my personal site: www.brettsteenbarger.com/bio.htm

Thanks--

Brett