Friday, February 05, 2010

Morning Briefing for February 5th: Consolidating Markets

9:38 AM CT - I added the top chart to show how we've continued the range trade mentioned below, with price oscillating around VWAP. The broad market has been weak, as we can observe with the advance/decline stats and the NYSE TICK, but we've seen a relative balance between buying and selling pressure in the ES contract per the neutral cumulative Delta readings thus far.

We can see that the ES futures attempted a move lower on the jobs release, failed to take out the overnight low to that point, and since has rallied sharply and moved above the day's volume-weighted average price (VWAP; red line above). That has placed us firmly in a trading range defined by the overnight highs and lows.

Note how volume has shut off below the volume bulge in the 1053-1054 area; acceptance of price below that level would continue the recent downtrend. It would not surprise me, however, to see a range trade that frustrates both bulls and bears, as the market digests the recent news and market moves. Accordingly, I'll be watching to see if selling can dry up below VWAP and buying can dry up above.

Longer term, I saw that 65-day lows across the NYSE, NASDAQ, and ASE expanded significantly after yesterday's drop. That suggests that the intermediate-term downtrend remains intact.