Friday, September 11, 2009

Morning Briefing for September 11th: Aligning Trading With the Big Traders

Here's a quick follow-up to the recent post on watching the real-time formation of support and resistance areas. If you click on the 30-minute chart above, you can see how the market has opened with more volume transacted at the offer than bid (green bars on bottom histogram), as we have been accepting value above the 1039 volume nodule noted in the early post during the premarket hours.

It is important to keep in mind that, on average, 53% of all volume in the ES contract is transacted from 8:30 AM - 9:30 AM CT and from 2:00 PM CT to the market close. That means that institutions that need to transact business *have* to participate at these times of greatest liquidity.

By seeing how markets accept and reject value during those periods--and by seeing where trade becomes one-sided and two-sided--we can infer important clues about the short-term sentiment of large, market-moving participants. This has been valuable information during this morning's trade, as we would see that buying weakness above that 1039 reference area was following the short-term market tide.