Thursday, August 31, 2006

Market Psychology Update for 8/31/06

9:00 AM CT - Very narrow range, with volume that started low and has gotten lighter over time. Buying and selling pressure are pretty well balanced on the Market Delta measure for ES, but we still see a positive skew to the TICK. If I had to trade this market (which thankfully I don't), I'd look for buying setups above that 1303 overnight level and play for an eventual test of yesterday's highs. But I'd need to see evidence of buyers lifting offers in ES more aggressively to pursue that idea. If we do test either end of the range mentioned earlier, make sure you see good volume pickup sustained on any breakout attempt; odds of false breakout are high, otherwise. I've got the rest of the day off; have a great trading session. Update tonight on the Weblog.

8:40 AM CT - So far, this is picking up where we left off the last couple of days. There continues to be a bid underneath this market, and we can see it in the distribution of NYSE TICK values. Those tell us that, as a whole, stocks are trading more often at their offer prices than at their bids. Buyers continue to be more aggressive than sellers overall. The TICK is not a weighted indicator, so small stocks contribute as much to its readings as large ones. That is why strength in the TICK tends to be reflected in strength in the secondary stocks, such as the Russell 2000 issues. That having been said, in the ES market volume opened predictably light and once again we see indications of a market driven by the locals. We'll get occasional sharp runs and retracements, with extended periods of back-and-forth as long as that's the case. My count of stocks making 5 min new highs vs lows has been positive all AM, based on the Trade Ideas screens. More in a bit.

8:20 AM CT - Good morning; this AM's updates will be more abbreviated than recently, as I'm taking much of the day off in birthday celebration. We've seen a narrow two-day range, and it wouldn't at all be surprising to see modest volume for the remainder of the week in anticipation of the holiday. Props to Jason Goepfert of SentimenTrader, who points out that the day before Labor Day has a bullish bias. That and the fact that we've seen a broadening of the market rally (see the Weblog for details) suggests that we should be testing recent highs in the near term. We sharply rejected the overnight lows at 1303, and should not break below that level if we're to see the upside today. Indeed, a break below 1303 would indicate fresh selling interest and would be an important short-term development. To the upside, 1308-1309 has been our barrier. Sustaining prints above that level would be an equally important short-term development. Back after the open.

10 comments:

Paulo de León said...

Happy birthday....well deserved day off......

Brett Steenbarger, Ph.D. said...

Thanks, Paulo. The nice thing about taking a day like today off is that you don't miss very much!

Brett

Craig said...

Happy Birthday Dr. Brett!!

yinTrader said...

Bon anniversaire, Brett! You have the same birthday as Malaysia on 31 August. Another Virgo?

BTW should have abstained from trading with such a narrow range on SP but then I watched all night (Sin.time)to learn how to read MarketDelta more than to make money at this stage.

Had to exit (with nominal profit to cover com etc) before 1130pm Sin.time so that I can have my beauty sleep by midnight here.

Looking forward to more postings later from you.

Brett Steenbarger, Ph.D. said...

Thanks, Craig! One year older...let's hope also wiser... :-)

Brett

Brett Steenbarger, Ph.D. said...

Hi Yin,

I didn't realize Malaysia had the same birthday--Virgos all! I find it takes me quite a bit of time to learn new software and new patterns. My understanding is that the updated version of Market Delta soon to come out will have a replay feature that will allow traders to replay the market bar by bar and see patterns unfold. That should be an excellent learning tool--

Brett

yinTrader said...

Yes, we three (my birthplace is Malaysia) share the same star, which explains.......?

BTW your ref to sentimentrader seems to have similar function as whispernumber.com which my mentor Ray Barros commented.

I seem to learn more and more advance techniques each day , for a novice trader.

Cheers

Brett Steenbarger, Ph.D. said...

Hi,

Yes, I like the Sentimentrader service quite a bit. Jason Goepfert does a fine job looking at historical patterns in the markets. I do believe that trading small and keeping losses small during the learning curve is the best strategy for long-term success in the markets for new traders.

Brett

Brian Shannon said...

Happy Birthday!

Brett Steenbarger, Ph.D. said...

Thanks, Brian; your Alpha Trends blog is a great teaching tool for technical analysis: very practical.

Brett