Here’s best tool I’ve found for predicting the market intraday
Below we can follow the evolution of the ES
Monday morning, as soaring oil prices and fears of a possible new gulf hurricane
took precedence over Friday’s price strength. Knowing market regimes–how
your market is responding to developments in correlated markets–is essential to
trading success. Shifts in those regimes trigger asset reallocations among
large global/macro traders and investors, creating a new supply/demand equation.
That’s what happened Monday, as traders revalued the market given renewed energy
price strength and prospects of further storm damage.
As we can see from the Market
Delta chart, the market tipped its hand Monday morning with weak early
buying at the open and expanded volume on selling at the 9:40 AM ET bar.
We then saw greatly reduced volume on subsequent buying and a pickup of selling
as we broke below Friday’s volume weighted average price (VWAP). Notice
the very reduced volume at 1240.75 and 1241 in the 10:05 AM ET bar: the
inability to facilitate trade at those prices relative to the prior two bars
gave a good indication that this market didn’t want to trade higher.
There is no better sentiment measure in the short
run than the willingness of market participants to hit bids or lift offers.
When the players in size are hitting bids on on the heels of a strong day it
often means that there is an important regime change. Early Monday, the
oil/stock relationship carried the day.
Brett N. Steenbarger, Ph.D. is Associate Clinical
Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical
University in Syracuse, NY and author of The
Psychology of Trading (Wiley, 2003). As Director of Trader Development
for Kingstree Trading, LLC in Chicago, he has mentored numerous professional
traders and coordinated a training program for traders. An active trader of the
stock indexes, Brett utilizes statistically-based pattern recognition for
intraday trading. Brett does not offer commercial services to traders, but
maintains an archive of articles and a trading blog at www.brettsteenbarger.com.