Wednesday, January 17, 2007

Wednesday, January 17th: Morning Comments

10:04 AM CT - Volume has tailed off considerably, providing little follow through to moves. Meanwhile, we're operating with a bit less than a 5 pt range since the open in ES. Once again, the big takeaway is to understand as early in trading as possible what kind of market you're in and how much opportunity there is likely to be. When buying and selling pressure are moderate and volume is low, we tend to get this slow rangebound action. We're seeing a bit of life in the ER2 and NYSE TICK and I'd be watching for that TICK distribution to shift positively if we get higher TICK lows on pullbacks. Hope you have a great rest of your trading day; summary this evening on the Weblog.

9:37 AM CT - The TICK distribution--and especially the Dow TICK distribution--have turned downward and that's brought us back toward the S1 level. I see this more as a relative absence of buyers than presence of large sellers and, unless volume picks up, I don't expect a big day here. Very rangebound and choppy action; not a lot of direction or edge from institutions. I'm content to leave this kind of market to its own devices and not overtrade and get chopped up. I'll post at least one more time before calling it a morning.

9:12 AM CT - Got some selling when ES couldn't hold that pivot level, but overall the selling is not convincing, esp. in the large caps. We're seeing a bit more volume at offer than bid, but nothing to suggest solid buying by large participants. I'm content to be on the sidelines here; it is one of those morning periods where I'm not seeing a lot of edge or conviction in the market. Advancing and declining stocks about even so far. Very mixed early AM.

8:45 AM CT - Volume is moderate; not impressive, but the main thing is that there is very little follow through selling so far either in the TICK or in the volume at bid vs. offer in the ES. That has kept me on the sidelines, although if I get a sense that buying can't keep us above that VWAP/pivot level, I'll probably be short ES.

8:15 AM CT - The PPI came in a notch higher than expected, sending interest rates a bit higher and leading to selling in the stock index futures. The Weblog pretty much sums up my early AM strategy and gives the day's pivots that I'm following. Given the inability of the indices to hold above their Tuesday lows and the mediocre performance of the market following narrow range days (per my recent post), I'm looking to S1 and S2 as potential price targets early in trading, particularly if early bounces in the TICK cannot sustain a move above the VWAP/pivot level. Note the long-term trading range in the ER2 futures, going back to mid-November. We're heading toward the midpoint of that range, given the recent inability to make new highs. I'll be watching volume levels closely on early weakness to see if we get fresh supply hitting the market. We're not seeing a fundamental repricing of fixed income or currencies in the wake of the PPI number, which leads me to question whether we'll see a major shift in stocks. Back after the open.