Thursday, July 30, 2009

Midday Briefing for July 30th: Consolidating the Upside Breakout

Here we see the S&P 500 e-mini (ES) futures on the day via Market Delta. Overall, we've seen more volume transacted at the offer than bid (bottom histogram), though selling ahead of the Treasury auction cut into that. We also see a rising volume-weighted average price (VWAP; red line) and price staying largely above that line. Most important, we're building volume at the 989-993 area, which means that we're accepting value higher. All in all this is consistent with an upside breakout from the recent multiday range and with the scenario laid out in the morning briefing.


OKL said...

I thought

1) Yen not moving higher when equities pull back to vwap

2) XLE and Crude gathered some strength just as equities pulled back to vwap

3) XLF breaking >Jan09 highs and challenging those May highs

4) Not a big adjustment in the AD Line on the pullback to vwap

were signs that the bulls were still well in control.

SSK said...

Hello Brett, one thing that I see, is although we have a volume block that is forming in the area you mention, the POC is not moving higher in any real way, and the tempo is slowing. The gap up may be a form of excess, and with no follow through, speaks to me as the day timeframe traders in control of the auction, rather than intermediate time frame buying that would be present in a "trending market". A lot of work has been done to keep the price up here, and we are not making higher highs, as of the 30 minute period that ended at 2pm eastern. We have a mechanical low in the 987, that if it fails, would allow for a test of the volume block at the 984's. The tick looks to be hesitant every time it hits the +600 level, and has been rejecting it over the last couple of hours. Keep up the great work, Best, SSK (this post was written at 2pm eastern)

SSK said...

There is a two sided battle occuring here from 2:15-3pm eastern near the vwap. The 100 and 200 lot traders are long on the delta thoughout the day, a lot of passive bids in the 988-989 area. If we break above the 991's, I would be expecting a retest of the highs, if we break below the 987's, I think you will have some long liquidation taking us to the 984's. A tricky area. The tick is strenghing near the vwap a bit. You would think that if the 200 lot traders were net long, which they are, they would support the vwap, and that is probably what were seeing in the 988-989's with them sitting on the bid. It will take a bit move volume on the bid, in an intitiative manner to break us lower. If we do move lower though, there could be a good amount of long liquidation into the close. Best, SSK