Jul 082010

The European Central Bank kept rates at the low 1% while fueling speculation that the loss on Greek bonds is lower than most anticipated. Meanwhile the IMF has raised it’s global growth forecast. All the “good” news has fueled a rally in the European markets and the Euro while weakening the Yen. Thus the European news supports the huge run up in the US equities yesterday. US jobless claims came in lower than expected causing the ES to break above it’s then overnight highs. Has the ES overextended itself? It’s very difficult to predict. The jobless claims did not fuel the kind of positive response we usually get from good economic reports lately, so maybe that’s telling us something. In general, after a large trend days like yesterday, the markets like to take a breather. Yesterday’s price movement has created larger than normal LVN areas. The ES is in the middle of the huge daily comp volume cluster centered at 1064. It will need to move through the 1080 LVN to get back into the 1100 cluster. We have plenty of resistance above created in the 3rd week of June, but just remember that if greed or fear kicks in, the LVN rejection areas are often ignored.

 Posted by at 9:13 am

  2 Responses to “7/8/2010 Pre-Market Commentary”

  1. First of all, let me say thank you for both the webinars and the blog you have produced. I found the content excellent, both from an educational perspective, as well as an inspirational perspective. Refreshing given the current state of industry content available on the web.

    I have a few questions if you don’t mind my asking, regarding the use of your Footprint entry chart and setups:

    1) Do you care if bids or offers go to zero at the extreme? I’ve always assumed that meant a better signal, i.e., 0 x 121 vs 100 x 121) at a high?

    2) It also looks like you don’t worry so much about a traditional divergence such as a new price high with negative delta on your setups?

    3) Finally…I’m sure you’ve been asked this a hundred times, but given your levels and entry, it seems like you could easily play for much larger targets off certain levels, even if only with small runners?

    Thanks again for the wonderful contribution. Much appreciated!

    • Thanks for the compliments and feedback cleon. To answer your questions:

      1. Most footprint charts will always have a 0 on the bid at highs and a 0 on the ask at lows. We do like to see small volumes at at extremes which is an indication the market may be temporarily overextended.

      2. Right we are not specifically looking at conventional price divergences vs. deltas.

      3. Many times price does move much further than what we target and good trade management could take advantage of that. For the blog, we’re advocating targeting high probability targets (i.e. a close HVN), which is what we do most of the time. However, we also feel out the market while in a trade and will exit if it’s going against us or let price run if we sense momentum. Unfortunately, these are skills we have no idea how to convey so we don’t discuss them on the blog.

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