Monday, August 24, 2009

Midday Briefing for August 24th: Slipping Into the Range

Added comment 12:38 PM CT - We sold off below the pre-opening lows; note how volume expanded on the selling:

11:00 AM CT - 48,311 (61,769)
11:30 AM CT - 37,512 (56,682)
12:00 N CT - 196,526 (67,068)

Here's a clear indication of buying drying up at the highs and now institutional sellers participating to the downside. Catching this transition is very helpful even to longer timeframe participants, as it illustrates an important shift in sentiment among the large traders that move markets.

After moving above the overnight highs on solid buying interest, note how volume tailed off during the morning. Instead of attracting participation, higher prices facilitated less trade. That brought profit taking and a return to the overnight trading range.

Let's go back to relative volume and see how today has stacked up thus far. The first number is today's ES volume; the second (in parentheses) is the average trading volume for the corresponding half hour period. (Note: go here to see all of the average trading volume norms).

8:30 AM CT - 256,400 (232,738)
9:00 AM CT - 163,091 (206,277)
9:30 AM CT - 77,110 (133,732)
10:00 AM CT - 75,681 (105,369)
10:30 AM CT - 62,252 (95,450)

Note how we shut off trade during the morning hours, turning what looked like could be a trending day into a range one. If higher prices aren't attracting the participation of large market participants, there's a good likelihood that we won't sustain that strength.