Wednesday, December 20, 2006

A Context For The Market Open

Good morning, all. Thought I'd post a screen shot of what I watch to prepare for the market open. Notice that my Market Delta screen is set for 10-tick bars, which means that we form a new bar every time there's a ten tick move in ES. This enables me to see how the pre-opening morning trade compares to how we were trading in the afternoon. You can see clearly that we're trading above yesterday's value region (area with the most volume on the left hand Y-axis) and point of control (1434.75). Notice also how buying dried up as we tried to take out yesterday's afternoon highs, pulling us back into the preopening trading range.

My basic strategy for a first trade of the day is to see how we trade in the opening minutes and especially how the NYSE TICK distribution looks and whether or not we're seeing net buying or selling among large traders on the Market Delta chart. Once I get a handle on that, I'll get into the market for a move to break the preopening range. My research from the Weblog tells me to be alert for a consolidation of yesterday's reversal move, so I'm not assuming we're going higher just because we had good afternoon buying yesterday. Indeed, if we get buying that can't push us above yesterday's highs (and the overnight highs), I'd be a seller in the AM.

Have a great trading day--