Aug 192010

The market has been selling the lows and buying the highs overnight indicative of a fairly split view of overall bias. Claims may be seen as a big disappointment as institutions have been holding fast on the bet that the number would hit consensus or maybe even a little better. With this being the big item for the fear mongers we may see a flush from this that is pretty significant. However we may proceed cautiously at least until 10 when we get the Philly and Leading numbers which are both expected to be positive and to a fairly significant degree. If I had to guess I would guess that those come in at expectation and I do think that all things considered the 500k claims isn’t really so bad as it doesn’t really change the picture all that much. This said, we may just flush down and split the difference so to speak today and build a new support area in the mid to high 70s as opposed to testing the mid 60s again. We shall see. The slip in 30 year German yields under 3% is something I think is very significant and will promote more buying in the US Treasuries in conjunction with the weak economic news today. That said the German economy appears extremely strong and with a lack of inflation worries that will give a shot in the arm to equities. That tail has been wagging the dog of late and I expect that to continue. In any case, watch the volatility at the open and close to the 10 AM items. To play it safe stay away from the OL/YL levels as it is just a mess down there and wait for the first big flush down or fade a crawl up after some positive 10AM news if it happens…

 Posted by at 8:54 am

  4 Responses to “8/19/2010 Pre-Market Commentary”

  1. Gentlemen,
    Help me understand this comment from this morning’s Pre Market commentary “The market has been selling the lows and buying the highs”.
    Thanks. James

    • It means when the market swings down, it was pushing lower than the previous OL and when it was swinging up, it was pushing higher than the OH. Pull up a 30 minute chart and you can see the reverse triangle created by the Globex session. RG’s point was that traders did not know which way to move the market; they tried to push it to new lows, then pushed it to new highs, then another new low, then a new high again, then finally the jobless claims news started price into a downward trend.

      • I see the reverse triangle. I have been studying Market Profile for some time, but still have not been able to determine future direction. The Overnight session spent signifigantly more time above the developing valuea area and more volume below. I hoped you may have some insight that I am missing.

        • We’re not trying to predict future direction. We’re looking at fundamentals to get some sort of read on directional bias strength. In other words, is there any reason the market could make big moves today? The strength is usually driven by bad or good news. When the directional bias is strong like from the job claims this morning, we often have trend days. On trend days, we become very careful trying to fade levels.

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