Market Psychology Update for 8/24/06

8:45 CT: Once burned, twice shy: the S&P 500 Index futures (ES) are trading slow volume in opening minutes ahead of the new home sales data at 9 AM CT. As my modeling noted on the Trading Psychology Weblog, I have no strong directional biases going into the day's trade. So I look for the kinds of setups described in the most recent Weblog entry. To this point, we're seeing a slight leaning toward contracts transacting at the bid rather than the offer, but the NYSE TICK is modestly positive and we have more advancing stocks than decliners. My slight leaning is to the long side, esp. if we can stay above the lows established after the economic report (1297.50), but I'm not in a rush to actively trade a slow market. More to come...

9:30 CT - Very much a local-dominated market, with slow patches interspersed with runs, and the runs generally reversing the previous runs. That leaves us with what, so far, is an inside day. Volume at bid continues to lead that at the offer, and as I'm writing, we're seeing some deterioration in the NYSE TICK. So the bears have the slightest of edges, but this is not a market that will follow through on trending as long as volume is low and institutions are out of the trade. There's a time to be concerned about the return on your capital and a time to be concerned with the return *of* your capital. Slow days, for me, represent the latter. I'll post again if there are new, important AM developments; otherwise, have a great day.

12:10 PM CT - Just quickly wanted to return and point out that volume is really slowing down here. It wasn't long after I posted at 9:30 that volume picked up to the downside, and that's been the way we've had it so far today: more volume at the bid than the offer, but overall light volume. Low volume days tend to not be trend days and, so far on ES, we remain inside Thursday's range. With volume slowing and the sellers not hitting bids as aggressively in the last hour, I'd be careful about chasing the downside. Have a great rest of the day; update on the Weblog tonite.