Market Psychology AM Update for 8/23/06

10 AM CT - Hopefully you caught the market's change of character, as volume continued to pick up, including volume at the bid, taking us to new day's lows as the distribution of the TICK went quite negative. Catching those shifts in market character is essential to short-term trading success. My comments from 9:30 still hold, but note here that we're at the low end of the market's recent range and need to see downside volume continue to dominate if this is going to yield a breakout move to the downside. Have a great day; update on the day's action tonite on the Weblog.

9:30 AM CT - The housing data really knocked the wind out of the stocks, and it was across the board. Volume picked up, and it picked up at the bid, hitting small caps particularly. The distribution of the TICK also went southward. We remain rangebound, but we'll need to see some sustained willingness of large traders to lift offers if this market is going to surmount its early AM highs. My leaning is to sell strength as long as volume at offer cannot match volume at bid and as long as the Adjusted TICK runs negative.

9:10 AM CT - We continue to see modest volume and the sudden runs and reversals typical of ES markets dominated by locals. So far, we're inside the previous day and we're seeing a modest dominance of volume at offer vs. bid and a positively sloped Adjusted TICK line. I'm continuing to treat this as a rangebound market, needing the market to show me expanding numbers of stocks making new highs and expanding volume at the offer or bid before I'll assume any breakout move. As I write, weakness is showing up in the TICK and in the small caps; worth keeping an eye on.