Friday, September 29, 2006

Market Psychology Update for 9/29/06

9:50 AM CT - Here's my latest Trading Markets article. Hope it's a bit more exciting than this market has been. Volume really slowed down here. I'll be taking off now; hope you have an excellent rest of the day. Update tonight on the Weblog and regular weekend updates as well.

9:39 AM CT - Recent selling has held at that average price area of 1347, but volume on buying after that initial spike on the news has been quite modest. We'll need to see an expansion of negative TICK to sustain any kind of downtrend here. Similarly, we'll need multiple +1000 readings as we had earlier this week to sustain the upside. Until then, it's quite a narrow range.

9:31 AM CT - Some tailing off of volume here. Declines lead advances by less than 100 issues. Very little follow through to short term moves; lots of runups/rundowns and reversals, typical of local dominated trade.

9:25 AM CT - The uptick in rates continues on the heels of the strong economic report. Keep an eye. No major change in Dollar/Euro. Falling rates were a major underpinning of the recent rally; let's see how we respond to a possible rate backup.

9:20 AM CT - So far, it's a 3-1/2 point ES range and the economic numbers have not been sufficient to break us from the range on this Friday, the last day of the quarter. As mentioned earlier, fading moves above and below that average price of 1347 makes the most sense *if* you're going to trade such an environment. There's no outstanding selling pressure thus far, but neither has there been follow through to buying. I'm watching that TICK distribution carefully to see if that shifts.

9:08 AM CT - Strength in the Chicago PMI number was taken well by the market--note the program buying and expansion in the TICK--as we once again get the chance to break and stay above the 1350 area highs, with the 1346 region now providing near term support. Advances lead declines by about 300 issues--nothing to write home about--but upside volume (at offer) really picked up on the number's release. We need to stay above the AM lows to get a good uptrend day out of this; a decisive break below those lows would have me entertaining the idea of an intermediate-term market top.

8:59 AM CT - A pickup of selling took us back to that average price, and volume remains modest--all consistent thus far with the range bound hypothesis. So far, buying has not seen follow through. If that continues, expect a test of those lows around 1343.

8:45 AM CT - Some weakness in emerging markets (EEM) ETF; NQ and semis show weaker performance so far. Volume at bid vs offer pretty even in ES; TICK positive overall, but not robust. Nothing so far to lead me to believe that we're not in a range bound market: volumes are modest, with mostly locals doing their very short-term thing.

8:40 AM CT - TICK positive thus far, though not especially robust. NQ showing a little relative weakness; ER2 a little relative strength. ES trying to hold above that average price to mount an assault on range highs. Waiting for the two economic reports. Advancers over declines by a little less than 500 issues. Back shortly.

8:22 AM CT - Well, the Personal Income and Personal Spending numbers came in pretty much in line. We'll get Michigan Sentiment before 9 AM CT and Chicago PMI around 9 AM. We're hovering around the highs from the past two days, with that 1350 area offering immediate resistance. Note that we're further from the lows in ER2. Multi-day support is at 1343, so that gives us a relatively narrow range going into today's trade. My latest Trading Markets article will come out later this AM and details the many divergences in the current market. For intermediate-term trading, I am not chasing the upside here. The rally is just too narrow-based for my liking. A broadening of the rally, expanding the number of stocks making new 20-day highs and taking the small and mid cap sectors with it, would change my mind. Note that 1347 represents the average trading price of the last couple of days; as yesterday, I look to fade moves above and below that unless we get an expansion of volume lifting offers or hitting bids. But, like the last post noted, staying flexible is the key. Back after the open.

8:15 AM CT - As noted yesterday, this will be my final daily market update. Starting in October, I will resume daily postings to this site and the Trading Psychology Weblog, but won't be tracking the market in real time during the early morning hours. If you are interested in doing occasional free real time training sessions via the Web, with a focus on reading short-term market patterns, drop me a line. My email address is at the right sidebar on this blog. While on the topic of training, I'll be doing the Webinar for the Chicago Mercantile Exchange this Monday at 3:30 PM CT. It's free, but registration is required. Once again, thanks to Advantage Futures and John Conolly of TeachMeFutures for sponsoring the event. I will be doing a live event for the Merc that will also be broadcast over the Web on November 2nd. Details will be on my personal site shortly. Back in a bit.