Jun 042010

Clearly we have been in a holding pattern over the last couple sessions with traders waiting on the employment numbers today. In addition we have been sitting under a massive wall of resistance around the 7 handle. The price action is a little silly this morning in our view. If you discount the sell-off from the SocGen derivatives loss rumor and then price in the knee-jerk reaction from the poor non-farms number we may be at least a bit oversold. Ahead of the report we had basically no activity in fixed income or the Euro and the ultimate risk appetite barometer of the carry trade showing continued signs of strength. I tend to think that the employment situation alone won’t be enough to tank equities just yet and I do think the 67 handle should hold as interim support. That said, I don’t think we break the overhead resistance either and if I had to guess I would say we may sort of grind through the prices we just skipped over in the morning sell-off which are also prices that we ripped up through on Wednesday’s day session. We may try to develop a new acceptance area and much needed support between the low 80s and low 90s. When it looks like the sky is falling but not from anything catastrophic, I tend to bet the other way. There should be good rotational activity again today as long as we don’t have any panic trending conditions off the open and if so there should be lots of good fade ops both ways. Please note that the numbers shown in long/short trade sections kind of got reversed from the panic sell. Low volume areas that were longs from above are now shorts approached from below…

 Posted by at 9:17 am

  4 Responses to “6/4/2010 Pre-Market Commentary”

  1. Thank you for the great content on this blog. It is unbelievably helpful. Question:I looked at the ES Globex Day Footprint Chart (1020 setting which I believe sorts out day from night) this morning and it seemed to indicate a delta of -16% for institutional and -5.4% for rest of market. Did that change subsequent to the time you made your sheet or are you looking somewhere else/changed the settings?


  2. It takes me at least an hour and a half to do the sheet each morning. The exact time that I lift the volume stats varies and I am always watching it throughout the session. I also adjust for overnight volume and look at 50, 75, & 100 lots to assess the situation. In the overnight session it is rare that a hundred block is filled. For that matter one should also be aware that with first in first out fills in an ordered system, hundred lot trades most often are broken up and matched with smaller traders. Think about it, otherwise if I were bidding say 500 lots, would I have to wait to be filled until the exchange found a 500 lot offeror? keep that in mind. The majority of “big” trades don’t print as big trades at all. The idea is that bigger prints tend to belong to professional traders. But it is not uncommon for the biggest trader of all to be filled with dozens of 5 and 10 and 25 lots or whatever for the majority of the position traded. There is no true “institutional” number to be used as a filter. In fact, the 100 lot sample size in the overnight session is generally too small. Better to look at 25s and 50s unless volume is very heavy.

  3. PS:

    I generally find that the pre-market information is most pure and useful prior to any 8:30 news. Volume becomes skewed and any reactions blended with the overnight “pulse” tend to corrupt the big picture for me. The majority of economic news is either useless because it is already anticipated or otherwise priced in, or blatantly frontrun from cheating. I’m not saying news is not important – it is everything actually. But I’m saying the way most people view and react to news is. What is important is how news items are priced in and settle over time. That is how I was able to call the market this morning and can do so fairly consistently. The market reacted to the SocGen rumour but the item itself was vague and passe’ anyway. Derivative loss from an investment bank? Stop the presses. LOL. But you see how it ultimately meant nothing and we traded back up. Easy money, but not the kind of trade we talk about on this blog. Similarly the employement numbers were weak but we figured so going in. Enough to probe down a hair maybe but not catastrophic enough to make traders work late on a Friday or be willing to break key support or resistance. The volume picture prior to those two events showed absense of institutional participation in either direction on relatively low volume which essentially called a high probability for a grinding morning in a fairly narrow range and as you see that is what we got. If you read the volume and made sentiment decisions after those news events and didn’t think them through you might have incorrectly handicapped levels and/or anticipated a selloff.

  4. Thanks so much for the reply. Again, really helpful.

Sorry, the comment form is closed at this time.