Tuesday, February 13th Morning Market Comments

9:59 AM - We continue to see weakness in ER2 and NQ, and that keeps me out of the long side in the large caps. Note the transition we made from solid buying to mixed performance on new highs (small caps, semis, NQ underperforming) to reduced volume on buying to outright selling. Those transitions are what you want to be sensitive to in handicapping the odds that market moves will continue vs. reverse. Note how, with the inability to sustain the price highs relative to Monday, we fell back into the Monday range and back toward average trading prices from Monday in the 3 indices. The key to identifying that, as you review charts tonite, is the reduced volume on TICK upthrusts and especially the reduced lifting of offers in the Market Delta chart. That has led to increased downside volume and outright selling. We'll need to see a similar transition, with selling drying up, before we can again take the long side. Hope this has been helpful; have a great remainder of the day. Update tonite on the Weblog.

9:53 AM - Just not a lot of buying volume here so far. I need to see that *before* committing to a position. I'll wrap up in a few.

9:46 AM - Watching 5 min Market Delta to see if we can put in a short-term bottom here. If so, I'd expect to take out the day's highs. What I need to see on buying, however, is expanded volume. So far, volume has turned anemic on buying.

9:40 AM - A reader just passed along this tool for assessing market trend in ES. Much thanks. Note that we really haven't had extensive selling in TICK, just a lack of follow through in buying. Energy issues continue strong; semis weak.

9:36 AM - Note weakness in semis.

9:35 AM - Very nice volume lesson right there. If a move cannot attract fresh volume, the odds of reversal are quite high. Looking to see if we put in a short-term top in ER2 and NQ.

9:30 AM - Volume has tailed off substantially here. One of the reasons I've stayed profitable is that I'm willing to sit and not trade. I wasn't seeing consistent buying across the indices once ES broke the Monday highs, so I took what the market gave and just sat back. The buying right now is on reduced volume; let's see if new buyers commit and sustain the move.

9:23 AM - Seeing weakness in NQ and semis. I'm out and need to see these rises in TICK produce better price action before I'd get long again.

9:12 AM - Got a high in the Dow and ES, but not ER2 or NQ so far. I use the TICK pullbacks as buying opportunities as long as they come at higher price levels. If we get a TICK surge and we see non-confirmations, I take quick profits.

9:06 AM - If we break that 811.40 low in ER2, I'd be more cautious about the long side. NQ looking a bit heavy. Need to stay above 1793.5.

9:05 AM - My trade idea was to take out the prior day's high and that also got me out for a very short-term trade. I'm still viewing pullbacks as buying opportunities as long as we stay above the AM lows.

9:00 AM - Took profits, ready to re-enter if we get better ER2 action.

8:55 AM - ER2 having some trouble catching a bid, now getting selling; watching closely.

8:47 AM - I'm using weakness to gradually add ES. Tight stops.

8:40 AM - Targeting the Monday highs in ES; already there in ER2 and NQ.

8:38 AM - Energy stocks strong; semiconductors falling back into Monday range. Advancers lead declines by well over 1000 issues. Solid open.

8:35 AM - Solid buying out of the gate across the three indices. Note that we're very close to taking out Monday's high in ER2. Volume is above average for this time of day, which shows institutional involvement in picking up bargains. I'm looking at that 1438 low as the potential low for the extended trading session, which would have me buying dips.

8:23 AM - I'm looking to see if we can hold that 1438 overnight low; 1440.75 is the overnight high thus far. We're trading pretty much in the thick of the market's value area, so my leaning is to wait for tests of the edges of the overnight range before entering. Thanks to a reader (and excellent trader) for passing along this link for following world markets. If there are other tools you find helpful in tracking markets, do email me and I'll be happy to pass along. I find the Economic Calendar at Briefing.com to be a useful resource. It summarizes the economic reports due out and the expectations for those. See ya in a bit.

8:12 AM CT - Good morning! Chicago is pretty well shut down because of the snow, and I'm still fighting off this flu, but maybe we'll get some warmth and cheer from the markets. I just posted some expectations following weak market days, so that will help guide my thinking in early trading. We're currently trading above the pivot level and VWAP from Monday (posted on the Weblog, along with other pivot-based targets), so basically, we want to see if buying can keep us above that benchmark. If so, we'll target Monday's high; if not, we'll look for a test of those average prices and then a test of Monday's low. My general leaning is to be a buyer if we see selling dry up above Monday's lows and to be a seller if buying cannot sustain a move above Monday's average trading price. No big movement from the Trade Deficit number; no other big numbers scheduled for today. Thanks to all those who have submitted "best practice" ideas: I'll be posting those, one a day, for the next several days. Great stuff; I really appreciate the willingness to share ideas and collaborate. Back after the open.