Monday, January 15th: Morning Comments

9:15 AM - It's not unusual to see a breakout move begin in one of the more volatile indices before strong buying shows up in the Dow or the S&P 500. I've found that helpful on occasions for timing. I also like to follow the DAX as a potential leader of the S&P 500 early in the AM. Most helpful of all is filtering the Market Delta charts so that they only post trades of a certain size or greater. You then can see how many large traders are in the market and whether they're predominantly buying or selling. That is *very* useful in handicapping the odds of reaching a pivot support or resistance level.

I'll post full morning comments tomorrow, when we get back to regular trading. I'm gradually reshaping my personal site to make it a single-stop resource for preparing for the next day's trading; more on that also in the next posting shortly on the Trader Performance page. Have a great day.

8:57 AM - A little pop here in the Russell futures. All in all, I look for the most volatile market sectors and averages to lead the big caps, so often we can get an early clue as to market strength or weakness by watching the Russells, semiconductors, etc. Doesn't really matter on a day like today with extremely thin holiday trade in the futures, but is a worthwhile guide in the opening minutes of trade on normal trading days. The other thing I like to keep an eye on is the overnight range. When we break above or below that range early in trading, that represents fresh demand or supply. The question is then whether or not we can *sustain* that demand or supply. If we see volume pick up as we break above or below the overnight range, we then can look to our previous day's highs/lows and pivot-based resistance/support for next targets. It's a very structured way of thinking about market movement. Wrap up in a few...

8:40 AM - With stocks not trading and futures closing early, we aren't likely to have much happening. I won't be trading until Tuesday. But the break gives me a chance to elaborate on a few things. Incidentally, I just got an email from an excellent system developer who took the pivot idea and turned it into a mechanical system that backtests very profitably (and statistically significantly) without curve-fitting. I don't expect him to be giving his system away, but you can learn a ton from his site. A natural extension of the pivot research would be to the NASDAQ and Russell stock indices, but I think it would be fascinating to apply it to individual stocks as well. More on that topic shortly on the Trader Performance page of my personal site. More in a few...

8:23 AM - Holiday trading today, so my comments will likely be abbreviated. The lower the volume, the more likely the trade is to be range bound. It can also be quite jerky, as locals load the book up with impunity, knowing they won't get their resting orders grabbed by paper. When they pulling those orders from the book and start buying or selling, it can create rapid moves of several ticks, scaring traders out of their positions. Not my favorite trading environment. In any event, note that the Weblog is now posting pivot levels for the day; I've also posted a new article on using pivots and previous day's high/low/VWAP as profit targets. We have overnight support at 1440.5 and have been trading above Friday's high. Interestingly, the bull high of 1445 is also very close to our R1 pivot. That's a natural target if we see signs of early buying. The overnight support and then Friday pivot represent downside targets is we get early selling. As my Weblog commentary noted, I am going to be careful chasing highs if we don't have broad participation in early strength, given some loss of momentum on Friday.