A Real Test of Recent Late-Day Sentiment! And Remember What I Said Monday…

There’s this old Wall Street adage: “the amateurs trade the open, the pros trade the close.”

Frankly, that’s never been one of my favorites; I mean, of course pros trade the open! Although it’s likely true that there are more kitchen-table traders in the market between the morning open and when they head off to their day jobs. Yep, they are indeed easy pickings for the early-morning pro.

As for the close, indeed the pros do trade it, big time! And it’s a good indication of what they’re thinking in terms of the general very short-term state of affairs. Meaning, if they’re sour on general conditions, and expect that the overnight headlines and data from the rest of the world is likely to be net bearish, no way they’re going into the evening long (owning stocks). Of course, the opposite would hold true as well; if they believe the overnight headline risk is to the upside, they’ll be buying the close.

Here’s the daily 10-minute chart for the S&P 500 from last Wednesday to this morning:  click to enlarge

Note the white arrows pointing to the last 10-minute green bar at the end of each trading day. In 4 of the 5 (all of which where the S&P closed nicely higher than the previous day’s close) the bar is unusually long, with the white hash mark to the right signaling that they all closed at or near the high. Even the one (slightly) down day showed a notable amount of last-minute buying.

So, clearly, for the last 5 trading days at least, traders haven’t been comfortable being out of the market overnight. 

As I type the Dow’s down 580 points on Apple’s revenue guidance and a big miss in the ISM Manufacturing Index for December. So today looks to be a huge test of this bullish sentiment I’ve been noticing at the end of the last 5 trading days.

I’ll be back a little later with my take on Apple and on the state of U.S. Manufacturing…

Oh, and remember what I said Monday:

“Expect more huge volatility in both directions over the next few weeks…”


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