Wednesday, February 21, 2007

Wednesday, February 21st Morning Market Comments

9:52 AM - Back to the mode of looking at bounces for possible selling. I will be on the phone conferencing with traders so need to wrap up. Two important items for today: patience--let the market show its hand. We were getting a drying up of selling and only then did it make sense to go long. I nibbled long, the buying began to wane, and then we retraced. Second important item: don't let the winners turn into losers. I thought we had more upside potential, it didn't emerge, and I got out. That avoided significant losses. It's been a whippy trading session--we're not so far from where we opened. The important thing is to watch for those shifts in buying/selling to gauge likelihood of followthrough on moves. Have a great rest of the day; wrap up tonite on the Weblog.

9:41 AM - You can see how the shift from absence of buyers to the emergence of sellers occurred. That's why it's so important to scratch positions; not hold and turn gains into losses. Clearly market momentum has shifted back to sellers.

9:33 AM - Waited, waited, and buying never came. Scratched out.

9:12 AM - I continue to buy those pullbacks, but need to see stronger TICK to stay long.

9:05 AM - I'm nibbling long on TICK pullbacks that stay above the prior TICK and price lows.

8:59 AM - I'm considering the market's ability to hold above its Tuesday lows a positive for bulls here. Need to see expansion of buying (TICK), however, to return to the Tuesday highs.

8:55 AM - A lot of oscillation ahead of LEI, TICK distribution weak, but not extreme in either direction. Volume moderately high. My leaning is to be patient and let the market show its hand by either breaking out of its AM range or failing to sustain such a breakout.

8:49 AM - Need to stay above overnight lows in ER2 to get me buying.

8:45 AM - I'm actually now leaning toward buying if we get pullbacks that stay above the overnight lows. Basically letting the market show its hand.

8:38 AM - Volume is moderately high, got some bounce early. Need to see that dry up before I would go short.

8:26 AM - Oh yes. We have Leading Economic Indicators reported at 9:00 AM CT and FOMC minutes released at 13:00 CT. Clearly the equity index markets haven't liked the higher than expected core CPI; a strong LEI might also stoke inflation fears.

8:22 AM CT - Well, we moved above the 3-day trading range on Tuesday after overcoming early weakness, but now we're right back into that range on the response to the CPI data. Interest rates are up, dollar stronger vs. Euro, and--surprise--the dollar is stronger vs. the Yen despite an interest rate hike by BOJ. Not much in that response that would threaten the carry trade in the near term! Longer term, the BOJ may be forced into additional action if selling in the Yen persists, especially vs. the Euro. Check out this morning's post regarding persistent market strength; there's a very interesting trading pattern that's worked out 10 of the last 10 occasions over the past 3 weeks. Pivot-based price targets and some evidence of continued selectivity in the recent market runup are posted to the Weblog. My leaning will be to sell bounces that stay below yesterday's pivot, with an eye toward S1 and Tuesday's lows as downside targets. I am, however, also keeping an eye on the pattern mentioned in the blog post, in which early selling has been an opportunity to buy. We saw that in spades yesterday. Back after the open. I have some phone conferences with traders this AM, so my posts will be less frequent and focused more on general market conditions and ideas than specific trades that I'm placing.

2 comments:

LifePost said...

There is a volume gap on ER2 between 824-819. I'm waiting for the 10am EST # before entering trading.

Brett Steenbarger, Ph.D. said...

Lots of short runs and reversals; not an easy day for trend followers!

Brett