Thursday, February 22, 2007

Thursday, February 22nd Morning Market Comments

9:44 AM - Some days you see the market well, other days forget about it! Today was one of the better days. I hope these sessions help you frame hypotheses about how the market is trading by focusing on the balance of buying and selling within defined ranges and in the context of concrete price targets. These ways of thinking can be of help regardless of the concrete entry signals you might happen to use. Once you see how to identify ranges, read buying/selling pressure, and identify how large traders are leaning, the rest is practice and skill development. I'll be doing my phone interview tonite (link below); wrap up tonite on the Weblog.

9:37 AM - I exited a bit early; we did touch that 1458.75 target, but I wasn't seeing big sellers hit the market the way they had done earlier. I'd be on the lookout for putting in a bottom, which would establish a new range bound market. Wrap up in a bit.

9:35 AM - Clear downward shift of TICK over the course of the AM. Those TICK bounces are providing excellent entries.

9:33 AM - Took a little profit here. Watching to see if selling dries up, but ready to get back in if TICK expands to downside.

9:23 AM - We barely took out the overnight low; 1458.75 pivot is next downside target.

9:19 AM - Note how volume really picked up on the decline as the longs liquidated. Excellent market sequence. Textbook. Those TICK bounces are great short entries once sellers start to dominate.

9:15 AM - Great example of a false breakout and reversal. Worth reviewing at the end of trading.

9:12 AM - My leaning is to sell TICK bounces that come at successively lower price levels, esp in ER2. Note how we're back into the trading ranges for the 3 indices.

9:09 AM - In general, I try to follow the large traders. Over 30% of all stock market volume (and futures) is due to program trading. So when I saw a buy program hit the broad market--and especially ER2--with an upside breakout in TICK, I knew that the large traders had shown their hand, at least in the short run. I waited for the first pullback following the buy program to make sure no huge sellers slammed us down, and that was my entry. R1 was my target and when we didn't move promptly toward R2, I took what the market gave me. Very typical trade for me, combining awareness of large traders, TICK, price ranges, and execution on pullbacks from the anticipated move.

9:04 AM - Sure enough: ER2 back into its overnite range.

9:01 AM - Keep an eye on ER2. It led the upside, but may also lead the downside if buying is not sustained.

8:58 AM - Note that we've broken above our trading range. We want to see buyers sustain the rally, however, and *keep* the market above that range. Otherwise, I'll be looking to fade the breakout.

8:55 AM - Took some profits here after we surpassed R1; I'll be explaining the trade in a bit.

8:48 AM - I went long on the pullback following the program buy; will explain later.

8:45 AM - Program buy

8:41 AM - Reminiscent of yesterday's trade, with lots of little runs and reversals; very choppy. Makes it dangerous to buy strength or sell weakness. I become very patient in these kinds of markets. Until I see a clear trend of buying or selling interest, I stay on the sidelines.

8:36 AM - 1459.75 represents the overnight lows; I'd want to see that level hold on selling before I buy. We're very near overnight lows in ER2. I need to see some selling dry up in ER2 before I'd take the long side for a breakout trade.

8:35 AM - Moderately high volume; decent participation in ES, with slant toward early buying. Strong semis; watching ER2 closely for selling. If we're going to take out the upside, I want to see the indices and sectors in gear.

8:27 AM - I've been contacted by a couple of professional trading organizations to work with their traders starting in March, so I will be wrapping up these daily morning market updates at the end of February. It's been great being able to do these; February has been a nice free time for me, and it's given me a lot of time to work on my own trading. If you have questions about any of the topics touched upon in the morning sessions, feel free to leave a comment on the blog or email me directly. During March I'll conduct occasional morning sessions as my travel and work schedule permit and will announce those in advance. Also in March, I'll begin work on a video training project for traders that will tie together many of the themes from these morning sessions. Many thanks for your interest and support.

8:22 AM - After the close today at 3:30 CT (4:30 Eastern time), I'll be doing a free Web talk with John Forman, author of The Essentials of Trading. Here's the link for registration. I'll be taking calls/questions and talking about the psychology of traders and trading. Some of my talk will touch upon the theme of the most recent blog post on somatic markers. It's a fascinating topic and area of research. Also, later today I'll put out the group email to help programmers and traders get connected. Do email me if you are interested and haven't already gotten in touch. Thanks!

8:18 AM CT - Good Thursday morning! We're knocking on the door of bull market highs in the equity indices; a bit of a pop in interest rates. Initial claims came in a tad higher than estimates; no major move in the dollar vs. Euro. We're hovering near lows in the Yen. As noted in the Weblog, we're operating in a five-day trading range, so the big issue is whether these current price highs attract sufficient buying interest to launch us to new levels of valuation. If we see a drying up of buying in early trade, a logical price target would be the Wednesday pivot level and volume-weighted average price, as posted to the Weblog. If we see firmness in the NYSE TICK, I will expect a move to new price highs. Back in a few.

2 comments:

LifePost said...

I notice program trading and large block trades usually hit the market at 10:46am EST.

Brett Steenbarger, Ph.D. said...

Hi LifePost,

Thanks for the observation; I'll keep an eye out.

Brett