Monday, November 16, 2009

Midday Briefing for November 16th: Building Value

We moved back to VWAP on selling in the wake of Fed chair Bernanke's comments regarding the dollar, but promptly moved back to--and above--the prior market highs, as dollar strength abated. Interestingly, those new highs were not confirmed by the NASDAQ 100 and Russell 2000 indexes, and we've since moved back into the morning range.

Notice the volume histogram at the right of the Market Delta chart above; it summarizes the volume of ES contracts transacted at each price traded through the day. You can see that volume has built between 1108 and 1109, telling us that this is where the market has reset value following the morning rally. If we are going to either continue the rally or reverse it, we should see a rejection of that value level in NYSE TICK and volume transacted at offer vs. bid. If we do not see strong or weak numbers in those indicators, that value area becomes a fresh fulcrum for a range trade.