Market Psychology AM Update for 9/26/06

9:53 AM CT - Hope you've been able to track the market's increase in strength early and then its transition from the highs, as sectors began showing weakness even as ES was peaking. These are patterns very worth watching. We're back at the former resistance highs--a pullback into the trading range would target our average price for the AM (1338) and the AM lows. Only 585 more stocks advancing than declining; not as broad a rally as you'd like to see, given the importance of the 1340 breakout. I'll be talking tonight in Naperville; off to finalize that preparation. Also note on the Weblog the Monday Webinar via Teach Me Futures. Have a great morning.

9:40 AM CT - Those divergences at market peaks are killers. Also, although not technically fitting the Odds Maker pattern, I treated that high in ES as a breakout from the first hour range and remembered that it's been profitable to fade those. So much of trading success is just seeing patterns again and again until you can recognize them in real time and act on them promptly. The heaviness in NQ, SMH, and ER2 are a concern for the bulls; I'm also watching to see if we sustain a pattern of lower TICK highs and lower lows.

9:30 AM CT - Note that the recent ES high was not accompanied by a high in NQ; keep an eye on ER2 and TICK to see if we see signs of heaviness there as well. We should stay above the area that had been resistance (1340) to sustain the day's uptrend.

9:20 AM CT - Note the huge volume increase as we pushed to new highs, and the lopsided distribution of that volume at offer vs at bid. SMH is definitely the weak one here, and that will weigh on NQ if it continues. Indeed, some of that is transpiring as I write.

9:10 AM CT - So far the market is following its historical script quite nicely, following through with solid buying (TICK) and solid volume at the offer, testing the recent highs. Now let's see what kind of follow through we get. As long as the indices are in gear with volume at offer exceeding that at bid and TICK positive, the bias is upward.

8:50 AM CT - TICK distribution remains positive, and we're seeing more volume at offer than bid in ES. Upmove not especially broad: advances lead declines by only about 300 issues. I continue to expect a test of yesterday's highs if the TICK and volume patterns remain positive. Note at 8:55 SMH and ER2 weak here; not a broad rally. I will update later; too many Blogger problems. Sorry.

8:38 AM CT - Pretty flat open ahead of the number. 1333 represents support. Volume once again pretty modest, with TICK moderately positive. Major Blogger problems this AM; will try to update as I can.

8:20 AM CT - I'm having Blogger difficulties this AM, so updates may be less frequent than usual. We're between a solid support area around yesterday's lows (also the lows from the 19th and from Friday) and the resistance at yesterday's highs (also the recent highs from last week). As my last post indicated, reversals of momentum have a generally bullish edge in the short run, so I expect another test of those highs. We have consumer confidence numbers coming out at 9 AM CT, so may see somewhat muted trading ahead of the release. Back after the open.