Friday, August 21, 2009

Midday Briefing for August 21st: Sustaining Breakout

The Market Delta chart above shows the ES futures on an hourly basis. The bars are themselves drawn as distributions of volume at price, so that you can see how volume built at each period. Note that we have consistently stayed above the day's volume-weighted average price (VWAP; red line) and that significantly more volume has been transacted at the market offer than bid (bottom histogram). Finally we can see how we broke out of the volume/value area between ES 1010 and 1015 and now are accepting value higher, above 1020.

I have generally found that when we have a positive NYSE TICK distribution *and* we are seeing more volume transacting at the offer than bid in the ES futures, it generally pays to stick with the long side--even when other, correlated markets may be lagging. TICK is showing us that the broad universe of NYSE issues are trading on upticks vs. downticks; Market Delta shows us that the stock index futures are tending to transact at their offer price. That means that buyers are aggressive in the market, and--as we've seen over the last few days--that's worth paying attention to.