Friday, December 11, 2009

Morning Briefing for December 11th: Forming a Range

9:47 AM CT - I've added the top chart to show how we continue to trade in a range in the ES futures, oscillating around the volume-weighted average price. In such an environment, it is dangerous to chase moves above and below VWAP, as that average price becomes a kind of magnet for price over time. There simply is not enough institutional participation at such times to sustain a revaluation of price; note the lack of very high or very low NYSE TICK values for the morning. That suggests that relatively few program buys or sells are being executed--important market info.

The strengthening U.S. dollar was a great tell in pre-opening trade for the selloff that we saw in the ES futures (above). Note from the Market Delta chart how we have moved below the volume-weighted average price (red line) around 1102.50 (March contract) and turned the cumulative Delta from positive to negative. The rejection of price around 1105 has left us in a trading range, with yesterday's lows of 1095 anchoring support. I'll continue to watch volume as we get closer to the holidays, as a slowing of trade continues us in a multiweek range.