Tuesday, January 16th: Morning Comments

12:09 PM CT - Finally got back from my meeting and wanted to wrap up with a few concluding ideas. We started the morning by noting that the market had been strong during the holiday hours on Monday, but retraced much of this gain in the premarket trade on Tuesday. We got some solid buying (NYSE TICK) in very early trade, but none of the major averages were able to sustain a move above those preopening highs. Meanwhile we saw selling in the semiconductors, often a leading sector, and volume was mediocre compared to average volume for that time of day. What that suggested was that we weren't likely to take out the R1 level around 1445 and instead were likely to retest the market pivot from Friday of 1436. Because volume has remained tepid, I am not counting on a move to the S1 and S2 levels. Notice that measures such as TICK and volume at bid/offer tell us about supply and demand, but volume levels relative to average for the time of day tell us about volatility: how much movement we can expect from given supply or demand. Because we don't have strong buying or selling in the TICK (the Adjusted TICK is negative on the day, but not at extreme levels) and we don't have above average volume, I don't expect a large move on the day and, indeed, anticipate more of a rangebound market. The key is monitoring these variables in real time to identify as early as possible what type of market we're likely to be in and which price levels we're likely to hit. Hope that's helpful in structuring your thinking and trading. Have a great one. I'll summarize the market stats and strategy for Wednesday tonite on the Weblog.

9:05 AM CT - Notice how the semiconductor weakness nicely tipped us off to the pull back in ER2, making a nice trade. Volume did not expand as we got buying in the TICK and we could not surmount the Monday highs. So that led me to fade strength, with the overnite highs a logical stop. Unfortunately, I've just been called away to a meeting so will have to end the AM comments. We'll need to see fresh strength to be buyers in the market. Otherwise, I'm sticking with the scenario of pull back toward the Friday pivot midpt. Have a great day.

8:52 AM CT - Watching here to see if buying wanes after the pullback in the TICK; small short position in ER2. The TICK has been strong; not the Dow TICK. And so far the buying has been unable to breach the preopening highs.

8:40 AM CT - Volume is moderate; not a lot of institutional interest so far. Note some early weakness in semiconductors, which often lead. TICK opens positive, and advancing stocks lead nicely over decliners by over 800 issues as I write. I would not fade the buying interest as long as Russells are showing relative strength, but I'm keeping a close eye on them as the next possible sector to weaken.

8:23 AM CT - Just a little note re: my personal site and how it might be of help for traders. Some of my favorite articles on trading techniques and trading psychology are archived on the Articles page; they're also arranged in chronological order so that it's easy to read the most recent pieces. The Trader Performance page is a weekly blog that is really my personal journal of thoughts regarding ways of improving trading performance. Some of my favorite blogs, sites, and services are linked on the Trader Development page; it's a good start to find sources of information that might help your trading. Finally, the Trading Psychology Weblog digs up interesting blog links from around the Web each day, summarizes indicator data on the recent market, and outlines my basic trading strategy. It's a way to track what I'm looking at prior to each market open. TraderFeed will be summarizing my most recent market research and trading psychology ideas, with morning market updates to help readers track the equity index markets in real time. Taken together, these are, to my knowledge, one of the most extensive free collections of trading and trading psychology resources available on the Web. Another fine collection of free resources can be found on Woodie's site. The idea behind my work (and Woodie's also) is to model different ways of thinking about markets--and thinking about yourself--that will aid your trading performance, so that you can become your own market guru and trading coach. Specific mentorship resources can be found among my Trader Development links. See you after the open.

8:05 AM CT - Good morning. Monday saw abbreviated trading in the stock index futures, with a bit of a continued rise, but we've pulled back in pre-opening trading this morning. See the Monday, Jan. 15th entry of the Weblog for the basic trading strategy and pivot levels I'm looking at. My latest post shows bullish expectations during periods when energy stocks are falling and technology shares are rising, but I'm going to need to see evidence of buying early in trading to enter the long side for a move to the 1445 R1 region, which also happens to be close to the bull market high. If we fail to see that buying materialize, I'll be looking to sell on bounces for a move to the 1436 pivot level. I'm watching 6746 resistance in the DAX (cash), and I'm watching to see if NQ sustains a return to its Friday trading range. As the Weblog noted, Friday's market, despite rising prices, showed a loss of upside momentum relative to Thursday and this is frequently followed by a pullback that creates a trading range. If we move back into Friday's trading range in NQ and ER2, I'll be much more likely to fade bounces in ES early in trade. I'll also watch carefully for any test of the R1 level to see if volume expands by lifting offers or if sellers use the opportunity to take profits. In short, the rally looks a bit tired to me and I'm sensitive to the possibility of pullback to a trading range. As always, mentally playing out the what-if scenarios prior to the open is helpful. Call me a quite cautious bull going into the open. I'll post updates in the early AM when I see important developments.