This chart adequately pictures the move from March 09 to the present. Please note that the last move up is the largest up wave on the chart and now has the second largest volume on the chart. It very well might be the largest soon and is far larger than the average volume bar. Coming 18 months into the move, I believe it is climactic and will, if it has not already, exhaust demand. That the Fed can conjure demand out of thin air, should not lead us to ignore the implication of this chart. The exhaustion of demand, especially in an upthrust position could be a terminal event for this move beginning March 09.
On this chart I will clearly show the evaporation of demand and the rise of selling pressure. Please note the buying climax at almost 75 million shares, which is double the black bars that preceded in this up ward move beginning 11/3. The next up wave on 11/5 has half the volume and a smaller range. Could demand be starting to diminish? The red bar following has the most volume--selling pressure of any red bar since the move began 2 days before. It also takes out the low of the preceding column of 3 o's. Demand is faltering but after a move of this size a reaction is to be expected. The selling diminishes at 122 and demand comes in with the rally to 122.56. For the rest of the day the rally continues but the black bars never depict as much demand as on this first rally. The rally to 122.64 has no demand at all and following down wave has more volume than the preceding up wave. Selling pressure is exceeding buying. The next rally to the high at 122.88 has lackluster demand. The following down move breaks through the preceding 4 o's at 122.4 and 122.48, making a lower low. Most importantly, the volume is the highest red bar since up move began on 11/3. This confirms that the trend has probably turned. As of yet we have no way of estimating how long and how far this move will go. With the evidence at hand, Mr Wyckoff would say that all investment positions should be liquidated. I would add that the exhaustion of demand in an upthrust position is especially ominous for a major decline and could be terminal for this 20 month old rally.
This is an index of the most widely held equities by institutions. Having built a base at 483 this index moved upwards nicely and absorbed the offerings at the old high of 506.66. It has since broken through after the most minimal retracement. This is highly bullish behavior and tells us in no uncertain terms where the institutions--big money-- stands in this market.
The accumulation on this chart began in July of 2009 arguably and the ease which it has moved up since the spring at 284 in June 2010 supports that case. This also gave back little ground retreating 20 points to 364 after gaining 100.
The Russell advanced to its resistance at 640.92 and has held against it implying that this is absorption and higher prices are coming.
As above but making more progress into overhead supply.
Further supporting the argument for much higher grain prices and equity prices, there is a good chance that we making a spring beneath the 39 line. Any move above 39 would be very bearish bonds especially if there is any serious volume on the decline. Bonds move the opposite of yield and frequently the opposite of stocks. We might be setting up fpr the low in yield for a generation.
I was going to post my Wyckoff position sheet but cannot do so without giving my name. I will summarize it:
#1 upward move of 3-10 points --84 of 106 stocks on the list
#2 upward move of 10+ points --63
#3 downward move of 3-10 points--6
#4 downward move of 10+ points--1
#5 neutral no opinion 50/50-- at least 4 some i did not rate and are not counted
If you could see the charts some themes would come through, such as the strength in iron ore stocks like MSB or CLF or UYM. Or the strength in cloud computing stocks like RAX, RHT, or ARUN among others. Finally natural gas stocks like FSYS or NGLS if they develop upward volume and the corn stocks like ADM or CPO deserve some study. The South American Banks and dollar type stores and credit type companies are also strong.
Needless to say I have positons in some or all of these companies or have them under active observation.
Here is the list of companies I follow. Much of it comes from the IBD 100.
The author is a concerned citizen who spent many years studying the stock market works of Richard Wyckoff. The purpose of this blog is to give a running commentary from a Wyckoff perspective of the greatest financial debacle in our history.
