Friday, August 28, 2009

Midday Briefing for August 28th: Bulls Not Feelin' It

2:10 PM CT - I've added the Market Delta chart above to show how we are building volume at lower price levels during the afternoon, accepting value below the day's VWAP. As long as that remains the case, I'd be looking for an eventual test of the Thursday lows. I have a small pioneer short position in the S&P that I'll be blogging about later.

The bulls just aren't feelin' it. I show that we've made about 1000 new 20-day highs across the NYSE, NASDAQ, and ASE on a day where ES (chart above) moved to marginal bull highs. The rally just keeps thinning out in terms of participation: non-confirmations, from emerging markets to commodities, continue to abound.

We sold off sharply following the early strength and, since then, volume at the market bid (bottom histogram) has swamped volume at the offer. We've also moved convincingly below VWAP (red line) and the volume bulge around 1030 (side histogram).

This sets us up in a very distinctive range between the lows that we rejected yesterday and the highs that we've rejected today. The weakening participation concerns me; I'm a seller on strength as long as bounces cannot take/keep us above VWAP and that 1030 level.