If you click on the ES chart above and look at the 9:30 AM CT - 10:00 AM volume (blue arrows) for the past few days, you'll see that today's trade started with modestly below average volume but then--on a relative basis--expanded volume during that third 30-minute segment. Relative volume is a powerful gauge for showing us who is in the market at a particular time frame.
What that tells us is that more institutional traders participated during that half hour than is normally the case; that 9:30 volume of about 175,000 contracts was well above average. This is important, because it suggests that the bounce off the early lows has been gaining interest from large participants. As long as that is the case, we can expect follow through to the upside.
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4 comments:
Dr Steenbarger: If you change the timeframe for the analysis, you'll find that Friday's volume from 9:30 to 11:00 ET was about 16% higher than today's volume. At least on the SPY. Regards.
Hi Dr.Brett, the 30mins volume number is great in hindsight ...what is a pratical application of this observation going forward during the day, does the price level formed duing the rel vol spike act as support?
An excellent read early in the day.
Thank you as always.
Hi C and Joslin,
Yes, my analysis was of a single period in ES futures and its relationship to price change. That relationship held through the day, creating a trend on the day timeframe. One way of thinking about trend is that it reflects a correlation between direction and volume/volatility.
Brett
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