Tuesday, March 23, 2010

Morning Briefing for March 23rd: Forming a Range

9:56 AM CT - I've added the top chart to show the continued range trade in the ES futures. We have moved below the overnight range and ticked above it, each time returning back into the range. Getting day structure right and fading those moves away from value is how intraday traders can mint some coin during otherwise slow, trendless markets.

We can see that the market is setting up in a trading range during the overnight session, oscillating around the volume-weighted average price around 1162. As I alluded yesterday, I like to look at the overnight range as an "opening range" and play for a breakout of that range as an early trade idea. Very often, the early distribution of NYSE TICK readings will give a clue as to that breakout move--and also to whether the break can be sustained. I also like to look at the Cumulative Delta (volume transacted at offer minus volume transacted at market bid) to provide a gauge as to whether we're likely to sustain a breakout or stay rangebound.

Thus far, we're not seeing decisive moves among the majority of risk assets, which keeps me in range trading mode to start the day. I'll update later this AM.