[Soultrader]

Yesterday the Dow recorded its worst single day drop ever of over 750 pts. This is slightly worse than the first trading day after the 9/11 attacks.

Yesterday Nikkei expressed severe weakness breaking at key support level despite the somewhat optimistic news on the $700billion bailout over the weekend.



At first, it appeared that traders did not think the bailout would save the financial markets. I was extremely pessimistic going into the US session... and due to the rejection of the bill we witnessed a crash.

A little on the VWAP

I use the 24 hour session VWAP as a dynamic support and resistance tool. This is primarily because institutions use this marker to buy/sell contracts. Yesterday premarket ES, showed resistance at the VWAP and then tanked shortly afterwards.



Thoughts on the upcoming weeks/months....

Investors and traders are expressing severe pessimism in the financial markets. Even after this crisis settles, will fresh money be poured into the financial system? Or are we likely to see a shift in foreign investment into other markets?

Quarterly chart on ES... retracement for long term participants?



Where will the money flow next?

[firewalker]

Originally Posted by Soultrader »

I use the 24 hour session VWAP as a dynamic support and resistance tool. This is primarily because institutions use this marker to buy/sell contracts. Yesterday premarket ES, showed resistance at the VWAP and then tanked shortly afterwards.

Very sweet that vwap line... I had my ('static' if you wish) resistance drawn exactly where your vwap line was. Made up for a perfect short.

I wonder where to from here... we closed near the low yesterday, and we broke the previous lows from September easily. The Nasdaq lost close to 10%. So it doesn't look like a bottom is in yet.

I'll add another chart, from the small caps. It shows the market ranging in the last couple of months, yet failing to make new longs. This compared to the DOW & ES signaled strength imo. However, it looks increasingly likely that the lows will be taken out soon as price is on it's way down for the fourth time...

[Soultrader]

Very similar to the Nikkei daily charts in comparison with global indices.

A bit of strength today on the Nikkei despite all the negative news out on the Asian markets tanking. You'll see short covering at the opening and pretty much holding for the rest of the day followed by further rally in the evening session.



DAX is showing even more strength than the Nikkei.



A little premarket resistance on ES at 1154.

[Soultrader]

A bit of weakness present on the Nikkei after yesterdays strength. Rejection above yesterdays value to fall within value area. However pretty rangebound today and hovering in the upper half of yesterdays value area.

The Asian markets seems to be hesitant today and will most likely wait on the US markets to start. Therefore, I feel like the US markets will lead for the day and then the Asian markets will react accordingly tomorrow morning.

[Soultrader]

Another VWAP setup on ES premarket. Combination of VWAP, volume, and candle patterns.

[Soultrader]

Further resistance at VWAP....

[Soultrader]

Just a word of caution today. I expected strength to follow through in the Asian markets today but we are seeing a complete downtrend.



Premarket ES is extremely weak as well tanking well below yesterdays close.

[firewalker]

Originally Posted by Soultrader »

Just a word of caution today. I expected strength to follow through in the Asian markets today but we are seeing a complete downtrend.

Premarket ES is extremely weak as well tanking well below yesterdays close.

Thanks, interesting to see what happens on the other side of the globe

However, I'm not sure about the importance of overnight moves on the US indices. In the past I saw price falling through support or breaking resistance premarket, and my hopes were high for a continuation. However, in many cases a pullback to previous S or R didn't provide a new rejection, but price just crawled it's way back up above previous S and R, seemingly ignoring what happened before.

As it happens, Steenbarger wrote something in his blog this week that gave me some thoughts:

"...the fact remains that many short-term traders find their opinions colored by what happened overnight. In reality, these function as independent markets: what happens overnight is not predictive of what happens during the trading day."

Coming from someone who's pretty fond of analyzing historic market data, I was actually rather surprised to read such comment.

See also
http://traderfeed.blogspot.com/2008/...bear-isnt.html

Perhaps anybody else got an opinion on this?