Monday, August 03, 2009

Thinking About Morning Market Action: Framing Trading Ideas

Let's take a look at Twitter comments thus far this AM. Note how observation of a fly in the bull ointment began with an observation of NQ weakness before the open; open minded watching of how we traded around the open price (and 7/30 high price); and then observation of weakness within 10 minutes of the open.

8:17 AM CT - I'll be watching NQ this AM; it's off its overnite and 7/30 highs. Financial stks set to open abt 2% up. Watching those too

8:37 AM CT - Watching how we trade rel to 994.25 ES open price; USD weak; TICK strong; 1793 more advancers than declines.

8:39 AM CT - 17 stks up from open, 23 dn; mixed open so far despite pos opening gap. XLP, XLV weak; XLB, XLE rel strong.

8:41 AM CT - Note that mkt open is also near that 7/30 high; if we can't stay above open, that also means we're bk into 2 day range. ;-)

8:49 AM CT - Seeing some unwinding of intermarket themes: USD strengthening, gold, oil seeing some selling; most sectors dn fm open

8:51 AM CT - Note that inability to stay above 2 day trading range targets pivot level as price target.

8:55 AM CT - IWM showing rel weakness from open; 12 stks up from open, 28 dn; mixed TICK distribution

9 AM CT - Significant buying burst on 9 AM CT news; watching to see if we can get and stay above the early AM highs.

9:02 AM CT - Once again that 994 level proving crucial; Russell, NQ off highs; mkt having difficulty sustaining rally.

9:05 AM CT - Note renewed dollar weakness providing bid to stocks, gold, and oil; we appear to be trading off USD; moving to new highs

9:07 AM CT - Marginal new high in ES not confirmed by other indexes; 18 stks up from open, 22 dn.

Given all the above, how would you be trading now? What would you be thinking about to frame a trade idea?

What I'm trying to illustrate is both a way of thinking about price action and a way to provide an extra set of eyes for traders as they're trading.


lll said...


ChiTown said...

maybe i'm missing something. i read the comment and said, well, obviously the mkts can't hold the highs. BUT we made new highs, right? e.g. @09:41 CST, SPY hit 100.35 (OHL 99.85 100.35 99.31)exceeding 2d highs. breadth up & rising, LinRegr for TICK flat, TIKI downward trending on 2m intraday.

Obviously, I'm a bit confused and missing patterns. Brett,
what do you see as noise and what is most meaningful at 09:50 CST ??

Brett Steenbarger, Ph.D. said...

Hi ChiTown,

I do indeed think there were unusual cross currents early this AM, with intermarket themes bullish and profit taking in early trade. That was confusing for me as well; I don't think you were missing patterns. But as my tweets from 9:20 AM on indicated, the confusion was resolved for me short term when TICK stayed positive and we stayed above the key 994 level. But the cross-currents remain and I won't be a bull if/when we retreat below 994.


Matthew C. said...

Nice call Dr. Brett.

Unfortunately, my short at ES 1000 didn't get triggered. Oh, well, we all know the saying about opportunities and losses. . .