Before The Opening Bell 06/08/09

The market spent most of the overnight session below Friday's low, and the VWAP Bands have acted as resistance. As I'm writting this, the market has traded above Friday's low, which may act as support if the market stays above this level. The market is also trying hard to stay above the 929.50 support level.

Charles

VWAP

VWAP is said to be used by the "Smart Money" or the large investing firms. These firms use VWAP as a trading benchmark for their clients. When buying they try to buy at or below the VWAP, and when selling they try to sell at or above the VWAP.

I always thought that the term "Smart Money" was a bad description of these firms, especially after looking at what happened last year with many of these firms going broke. They really should be called "Large Money". They influence the direction of the market, but they are not any smarter than the average Joe. They make the same trading mistakes that the rest of us make. Just read "The Professional Commodity Trader" by Stanley Kroll sometime. The big money in trading consulting is not with the average retail trader, but with these large investment firms. They spend a lot of money trying to figure out how to stop being consistent losers when trading the markets. So, don't feel so bad if you are struggling with trading. The Smart Money struggles also.

In the charts below, I have three VWAP lines that start at 0300 ET, since this is when volume starts to pick up as the European markets open. The Green line is the VWAP based on the high of each bar. White is the Close, and Red is the Low based VWAP's.



Yesterday, the market traded quickly below the VWAP lines within the first 30 minutes. The VWAP range then became resistance for the rest of the day. Also notice in the last 30 minutes how the market traded back to the VWAP line, and then quickly traded back down toward the close of the day and week.



Here is the opposite scenario, where the market remained above the VWAP range most of the day, and in the last hour, tested the VWAP line and shot quickly back up to the close of the day.



Here is an interesting day where the market first traded down, tested the VWAP early only to trade through this zone, and then treated the VWAP zone as support for the rest of the day.



On this day, the market traded down, and then tested the VWAP zone at the European close. This zone acted as resistance, and the market traded down for the rest of the day.

A consolidation day in which the market first treated the zone as support, then resistance, and then support again.

Lastly, a day when the market remained almost entirely within the VWAP zone most of the day, but then had a strong finish to the upside.

Charles

Morning Review 06/05/09

I was looking at the 1 and 5 minute charts all morning. I first thought that the correction off the bottom went a little too far. However, after looking at the 620 tick chart, I realized that it was a normal 50% correction from the overnight high. Being a technical trader, I really need to focus on the 620 tick chart more. The market is currently struggling to stay above yesterday's day session high.

Charles

Thirty Minutes Before the Opening Bell 06/05/09

The market is getting excited about a lousy Employment number that wasn't as lousy as expected. The futures bounced to a high of 957.50, and is currently at 953. Let's see if 949 holds as support. The 50% correction between the 922.50 low of two days ago and this morning's high of 957.50 is 940.

Looking at the Index's weekly chart, resistance is in the 960 - 965 area. The 50% correction of that large down wave from August to March is near 990.

Charles

Afternoon Review 06/04/09

The afternoon comments are on the chart above. The market ended up a little more bullish than I was anticipating.

Charles

High Probability Three Wave Pattern 06/04/09

I'm posting this because in the heat of battle I also have a tendency to overlook these high probability Three Wave patterns. We also had one to the upside a little later. The market for whatever reason typcially will give you the three waves in a directional reverse more than 70% of the time.

Psychologically, I have a tendency to focus on the first wave, and then lose focus and miss the third wave, which is the higher probability move. You can make a living on trading that third wave.

Charles

Morning Review 06/04/09

We did get a 50% correction this morning off of the open with the market testing the 929.50 area. So far, support is the overnight low, and resistance is the overnight high.

The new indicator setup.

Charles