Thursday, February 04, 2010

Morning Briefing for February 4th: Downside Break

9:30 AM CT - I've added the top chart to show how we've traded lower through the morning, with volume at the bid far exceeding that at the offer (bottom histogram bars). Note how we've built volume steadily lower through the morning, staying below the volume bulge referenced below. Relative volume has been above average, giving us a nice trade to the downside targets from the morning tweet. I'll post more on this topic shortly.

We've broken out of yesterday's narrow trading range; note also how we rejected the volume bulge of 1089-1091 in the ES futures (above) on weak economic data this morning. Whenever we see a break out of a range, we want to be on alert for the possibility for a trend day. If we're going to see such a trend to the downside, we'd want to see buying efforts fail to take us back within that prior volume bulge. That would show us that we are accepting value at progressively lower levels until longer time frame buyers sense a bargain and place us back in equilibrium.

I'll be updating this briefing later this morning; stay tuned.