Trading the Opening Imbalance.

Hola,

I took a vacation last week to Culebra, Peurto Rico.  They should require all visitors to sign an NDA to keep this little island secret from the rest of the world. It is a small 1,500 person island about 20 miles off the east coast of the main island. Muy hermoso. if you want to know more about Culebra email me.  If you want to learn more about the MiM keep reading, if you don’t want to get my emails click on unsubscribe below.

I missed a busy week last week and am still trying to catch up, you might get another mailing on Friday from me.  Today I wanted to show a bit about the opening imbalance.  Our MiM product includes both closing and opening imbalance data.  The open is real-time from 8:00 am ET  to 10:00 am but is most informative just before the 9:30 opening when the crowd grabs the opening prices via MOO orders.  I personally don’t trade the open, some in the room do, for me, mornings are busy support wise. I do notice some areas where there just might be some trading advantages, and that has to do with the imbalance fueling the open and driving opening prices higher or lower.

I am mixing in today the NYSE-Ticks with the MiM.  If you have heard me talk about charts, you know that the NYSE-ticks is one of my favorite indicators to watch.  It represents a real-time look at the bear/bull auction on the NYSE. These are available via the chart streams in our MiM room, or I just used tradingview.com to capture the data.  It appears to be real time.

Let me see if I can explain this open today through the eyes of the MiM and the NYSE-ticks.

This is a typical looking opening MiM.   Around 9:00 am it starts running up to a peak and right before the open is almost 300M to buy.  The symbol bias was also 2:1 to the buy side.  Both pointed to a bullish open.

Now let’s look at today’s price action post open for the first 5 minutes of the trading day.

The OHLC bars are the front month ES contract.

The blue line-on-close indicator is the NYSE ticks. As a refresher, the ticks are the difference between the current number of  NYSE stocks trading on an up-tick (bullish) minus the number of stocks trading on a down-tick (bearish).

The blue dotted line is the plus/minus dividing line.  The further the ticks go above the blue dotted line the more bullish the current price action is. The more below, bearish.

The two blue arrows I drew in are pointing to divergent action in today’s open.  At the open the ES price is climbing as orders are filled, but progressively the underlying market via the ticks is getting weaker and weaker.  So if the MiM got you into the market long based on its bullish stance, a close watch of the deteriorating ticks would have been your exit.  This market is not going to climb higher, at least not yet.  That is a 10 point move on the open that has deteriorated to negative.

I hope that is a sensical explanation of how to read those charts. As always I hope to impart information and to invite you to trade the MiM with us and use these indicators, our other tools and each other to improve our trading. Join us today and trade the close.

See you at the close
Marlin
marlin@mrtopstep.com
617 803-4776

How we capture our closing data video
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