Pre Market April 23, 2010

The market sold off sharply after the cash close and drifted down a bit overnight to 97.50 then straight up in an overnight rally to 1206.75 last. It found a home (Value) between 06.5 and 03.00 and looks poised to rally North. Thursdays Value area high was 1205.00. This overnight action has seemed to accept this area as market value. The Value Area high for today is (based on yesterday’s action) 1200.75, well below where we are trading now.

Even though we made a lower Value Area high, (1205.00 previously and now 1200.75) which is a bearish indicator we have shown price acceptance, at least overnight, of a higher area. Prices are rotating higher and it doesn’t seem like bears will be in control. We may see a test of the Value Area high and close the gap from 01.75 but after doing so unless Greece forgets to ship more Ouzo, (they sent a tanker load last night) we should see higher prices.

One of these days we will see two down days in a row but I don’t see that happening now based on the current data. I don’t particularly care if the markets go up or they go down just as long as they GO! It’s a difficult job to predict the direction of the market. Many have tried and many have failed to do so. Your odds are better gauging which way the market is going and getting on board for the ride. In other words if a market is going up the probability that it will continue is greater than it wont. And when the market is trading above the OR, Value Areas and the previous day Initial Balance (IB, the first 60 minutes of RTH) then the probabilities are even greater that the markets will trade higher.

I am not a fan of the common Support and Resistance numbers. I find that they don’t work that well. Maybe too many traders are looking at them, mostly amateurs. It’s the same for Fib numbers, they just never sat well with me but a good friend of mine and an excellent market technician swears by them. Its all a matter of finding what fits your logic and personality and learn its characteristics. Value areas make good sense to me. As in any auction process a group of market participants, trading S&P’s, corn or movie futures, will generally agree at a price area that is considered fair by both parties, buyers and sellers. This area is called Value. I also use some proprietary values that work like Market Profile Value Areas. They are areas that when the market tags them there is a high probability that the price will auction back to the middle of the range. If price trades above them with conviction then there is a good chance price will tag the next higher (or lower) number.

It is your assessment of how the market behaves around these figures that can give you a clue if you want to scale out of your position, close it and wait for a reversal sign or add to your position.


Tim Mack