Thursday, May 07, 2009

Catching Market Themes Before the Open

Here's a quick snapshot of one of my Market Delta windows just prior to the release of numbers, prior to the market open (ES contract). I find that tracking the market before the open provides a feel for some of the themes that may move markets--or shift on us--during the trading session.

After making a double bottom earlier in the morning, we broke above the volume-weighted average price (VWAP) in a breakaway move. Participants in the pre-opening market were clearly lifting offers (green histogram at bottom). If you click on the chart, you can see within each bar the number of large trades (50 or more contracts) transacted at the bid vs. offer.

Note how higher prices were attracting the participation of large traders, adding to the breakaway move. Meanwhile, 10-year Treasury yields are sharply higher and financial stocks (XLF) are trading much higher pre-market, with higher stock prices around the world and oil prices rising smartly. I will be tracking these themes closely through the day to see if pro-growth trades continue to support the rise in stocks.