Wednesday, January 06, 2010

Formulating an Initial Game Plan for the Day

My trading day begins early in the morning with an assessment of overseas markets, an advance look at economic reports due for the day, a review of the prior day's market indicators, and a view of overnight Globex trading. Out of that overview comes my initial game plan for the day; that plan will be modified as those reports come out and we see how the markets respond to them.

If you take a look at my morning indicator tweet, you'll see that new 20-day highs continue to swamp new lows, by a factor of about 10:1. We've also made advance-decline line highs in the initial sessions of 2010. That tells me that the Monday break to new highs was likely legit; see my prior post regarding market themes.

We can also see from the indicator tweet that upside momentum was actually exceeded by downside momentum, as Supply exceeded Demand. This reflects the range conditions from late 1/4. On an intermediate time frame, we're in a bullish trend, but the short time frame has us in a range defined by the bull highs and yesterday's lows.

As long as we stay above the highs from 12/29, I'm accepting the breakout as legit and looking to buy weakness. As long as we stay above yesterday's lows, I'm using weakness inside the short-term range to buy. That's the initial game plan. During the day, I'll show how I modify or act on that.