Monday, January 22nd Morning Comments

9:33 AM CT - OK, I'm just going to sit around and wait for another good entry point to the downside. My longer-term opinion remains to the downside given the steady decline in market momentum and participation we've seen in recent days, as outlined in the Weblog. That led me to hold a short position overnight. It went against me in preopening trade, but that didn't change the larger picture. As it became clear early in the AM that we weren't sustaining buying, it made sense to entertain the hypothesis that we weren't going to take out Friday's highs. That led to the strategy of selling bounces in the TICK with a profit target of Friday's lows. The next downside target is S2 at 1428.75; I need to see buying drying up in ER2 before pursuing that target. We're getting a few divergences here that lead me to keep my powder dry. Hope this has been helpful. Again, I'll be out Tuesday and Wednesday, but will update the Weblog tonite and will post to TraderFeed daily (but not the morning updates those two days). Have a great day!

9:26 AM CT - I'm not chasing lows here; I'm out for the time being. We're getting a little buying in the semis, NQ, and ER2. May be temporary, but it's a yellow flag.

9:20 AM CT - Just a point of clarification. When the market gives me close to 6 points in 30 minutes time, I look at the odds that we'll go straight down even further. Those odds aren't good. Hence I take what the market gives me and look to re-enter on bounces higher. That's the difference between holding a core position and sitting through those counter trend moves and trading on a short-term, intraday basis.

9:15 AM CT - OK, we hit my first profit target, so I took some off the table. Now I wait to see if buyers can come in around Friday's lows. Until we see selling dry up and some evidence of buyers coming in, I continue to lean to the sell side.

9:05 AM CT - Both volume and selling have picked up, and we've taken out Friday's lows in NQ. I continue with my initial scenario and until the market proves differently I continue to see TICK bounces as short-term selling opportunities.

8:55 AM CT - Neither the Dow TICK (TIKI) or NYSE TICK is showing particular strength, which means that we're just not getting traders stepping up to the plate and lifting offers ahead of LEI. Volume remains subdued, and we continue to see relative weakness in small caps. Let's see if the numbers change the market's dynamics. So far, I've been anticipating an inability to take out Friday's highs and that's worked well. If volume does not pick up, however, it could be one of those slow, range bound days where it makes sense to take smaller profits when you have them. My downside target if we cannot get the pickup in buying is Friday's lows in ES.

8:40 AM CT - Just a little heads up. I'll be out of town Tuesday and Wednesday, working with traders at a hedge fund. I'll be updating TraderFeed during that time, but won't be doing the morning comments. I'll have a Weblog update tonight and then the next one after that on Wednesday evening. We're seeing modest volume--no significant institutional participation--in very early trade leading up to LEI, with relative weakness early on in ER2 and no extremes of buying or selling in the TICK to this pt. More volume is being transacted at the market bid than ask in ES, but again this is modest volume. So far consistent with a range bound market. Still watching closely to see if we can take out Friday's highs when we get buying. If not, I continue to lean to the sell side.

8:15 AM - We have a little firmness in the stock index futures prior to the open, with Leading Economic Indicators scheduled for 9 AM CT. The expectations are for some strength in LEI. Indeed, firmness in the economy has led to a recent rise in interest rates and taken away all expectations for a near-term easing by the Fed. As I will post shortly, these upturns in interest rates are associated with subnormal returns in stocks over a several-week horizon. I enter the day with a small initial core short position, given the loss of upside strength and momentum mentioned in the Weblog. The Weblog also has the day's pivot levels; I'll be watching carefully if we can hold above Friday's highs in all three major equity indices. If not, I'd expect us to take out Friday's lows. More after the open.