Markets 12/13/09 spy and spx

The market has flattened out into a 20 point range on the 10X1 point and figure. These flattened areas were considered by Mr. Wyckoff to be possible turning points. 10 across the 1100 line gives a count of 100 points conservatively, and that can be extended another 9 to the left to the October peak. Despite all the bullish hype, this market has not moved since October.

We closed the week at the midpoint of the range.
The broader the index, the less the progress over the past few months. This tells us the move is concentrated in a few issues, and probably those that can most easily be manipulated with the futures. The trading range on the $NYA extends back to the second week in September. Please notice that this average made a slightly lower low on Wednesday. The range on the rally bars since have contracted and volume has not expanded while we have swung to the center of the 7000-7285 range. The market is weakly pushing up against the 2 heavy distribution days a week ago Thursday and Friday. Quite possibly it is moving to a hinge.
A move down to 111.0 places this market on the hinge. From there we can expect a relatively large move either way,
Although the trade is getting crowded, watch the bonds. A more detailed post will follow later this week, time permitting.

Markets 12/13/09 currencies

The Yen is on the hinge at the red arrow. Given the upthrust, the clearly defined lower top after the upthrust, the way to bet is that the red line is at least tested.
9 across the 150 line gives a target of 150-9=141.
This is 5-6 month distribution range. Conservatively 7 across the 166 line gives a target of 159.

12 across the 165 gives 153. 45 across the 165 line gives 120. I am wagering you will see it.

While I have not put up the Canadian dollar, there is no arguing with the implications of these charts for a dollar rally. We have discussed many times the carry trade and its effect on markets and the dollar. It has now become a media cliche.

Markets 12/08/09

Since we are modern tape readers, we get the option of looking at the entire field. I am beginning with the long bond interest rate because my market sense tells me that something is cooking here and perhaps it is the leader. We certainly have the possibility of a long period of accumulation beginning in August. After making a low in October, the market rallied to a higher high in November and then sold off to 11/17. The market was supported at an old support point, consolidate and had a spring to 42.0. A rally back into the trading range confirmed the strength of the buying and at 42.28 we made a higher low. At 42.56 we were on the hinge and move we did. The retracement so far has been less than 50% and much of that small decline has been recovered by the last 2 x's on the chart.
This is a bearish chart. Last Friday had climactic volume and yesterday was an attempted rally that failed, indicating buyers were exhausted. Today we fell sharply with ease of movement. The line of least resistance for the immediate trend is down.
The market broke sharply and fell directly into a selling climax in the bars around 1. The first few bars up the market rallies smartly and then runs into resistance around 10:30 as buying also weakens with the diminishing volume. The market has a test at 2 and again rallies smartly for the first few bars. Volume diminishes on the decline to 10:20 telling us more rally to follow. On this rally however the volume never recovers and the market has a buying climax at 3. Although buyers are absent on the rally to 4, selling is anemic until the selling climax at 5. The rally to 6 also is weak. So basically the market was supported at its lows and the rallies were very actively sold.
The 1o count flat area at the upper right of the chart is enough distribution to cause a little less than q 10% fall in prices. Mr Wyckoff says these flat areas frequently represent distribution.
Do you see the trading range at the lower right supported at a slightly higher high? This chart currently on a hinge can support a rally.
Hinge treat in IBM
Should we not rally from the danger point we are on the springboard for a large decline.

Markets 12/07/09

A treat.
The bonds hinged last week and then yields exploded. After being supported at the red line for 6 weeks, yields had a spring, rallied 2 boxes back into their previous range, hinged at the red line and then exploded. This was a nice trade for the prepared.

As pointed out yesterday, the price of the SPX, has moved into a nice flat trading range and today has moved into a hinge position again. If the market rises 2 boxes, it will have been supported at a higher low and then made a higher high. If it falls 2 boxes is will have failed at a lower high and then made a lower low. That is why Wyckoff, I believe called this a hinge. The count for a decline is over 100 points at the 1103.2 line. The count for an advance is more complicated and I will discuss it when the time comes.

Remember the key bar here so far is the 13 million volume bar which was a selling climax. It was tested at 2 and then rallied to 3 this morning. At 3 the demand diminished and selling hit at 10:00, The market was supported on a narrow relatively high bar at 10:05 and then rallied weakly. The next sell-off until 12:20 witnessed little supply pressed on the market. The rally to 5 had small volume and many closes in the middle, implying good selling into the rally. The rally to 6 had closes at the bottom. Demand was exhausted at 12:40. The sell-off began and had decent participation. It stopped at a higher low and rallied weakly into the close. Notice how the hinge looks on this chart.
Today could easily be a rally that failed with tremendous possibilities.

Markets 12/06/09

Friday was the second day in a row that the market spiked higher and then sold off. Quite simply it is saying that when the shorts are done covering there is no demand at higher prices. Unfortunately the distribution is not yet complete as the 13 million shares before noon was very good support. Large interests will take advantage of it to sell more at higher prices. Notice how once it became clear demand had dried up, large numbers of shares were pressed on the market. If you thought distribution was just an idea, think again, because you can see it above.

In case you did not get what the market was saying, no demand above and the large interests are selling, it was kind enough to repeat it two days in a row.
Each box is the average true range of the last 20 hourly bars. The chart has flattened out at the pinaccle of a long rally showing that supply is inhibiting further progress. This kind of flattening can be indicative of distribution. On Friday, after making a new high, the market hinged at 1109.9 and sold off making a lower low. We still have not made a lower high that held. Although we can see the count continue to build, currently at 17 across the 1103.9 line for a count of 102, certainly enough to play for, the position without the lower high is neutral.
The current dollar bear market is severely threatened. I found one hinge, can you find others?
In blog land this is being called a bullish chart. Do you agree?

Bedtime.

Markets 11/229/09

Instead of assuming that the market somehow knows the future and somehow managed to get information despite the Thanksgiving holiday here and the holiday in the Islamic world which is closing markets until Tuesday, let's assume with Mr. Wyckoff that the market shows the interests of the major financial players including the government. In this case the interest was to buy in the thin market Monday so as to prevent a panic. And buy they did for 1 1/2 hours as virtually every close was near the top with heavy volume. The question is when and where are these support shares placed back on the market.
Mr. Wyckoff wrote that one of the indications of a change in trend is that the reactions are larger than the previous reactions and that is the reason I placed the blue egg underneath said reaction. The count on the 1100.5 line is 27 for a possibly substantial move down. The minimum short term move down from the top was 6 boxes across the 1106 line and we moved down 5 substantially completing the count. The market then rallied up 2 boxes to 1094.9 and retraced 1 box to the close. If it rallies 2 boxes from here the count is for a rally of 7 boxes. Declining 2 boxes will fulfill the count at the 1106 line and possibly confirm the down trend. We are on a hinge.
For your perusal.

Markets 11/24/09 There is something wrong in Asia

Notice the chart does not contain the last 3 o's which make the last up ward move climactic.
In my weekend post I showed how all of the world's major stock markets moved together. That they essentially moved with the Fed's QE. That the dominant players were heavily involved in one trade and that was to heavily short the dollar and be long everything else. There were signs of distribution throughout the world and there did not seem to be enough money to hold everything up. The leverage to do all this as well as to drive bond rallies all over the world and fund massive worldwide budget deficits is probably in the hands of a relatively small number of players. The leverage must be huge. A problem anywhere must effect everywhere...

There is a problem in Asia.
The horizontal formation of the past few weeks sure looks like distribution.
The spx also is flattening out in new high ground with shortening of the thrust. Moreover prices have worked out to an apex, to move either up or down sharply.
Oil looks like it is breaking down.
Treasury bonds surprisingly enough might be ready to move lower again.
The Russell continues much weaker than the SPX and now has a huge area of distribution going back ot early August.
Yesterday, prices were bid up overnight in order to create demand for equities, both from trapped shorts and new longs who like action. After that demand was satisfied, prices fell of there own weight. Today that decline accelerated and was sharp enough that support stepped in with stunning demand at A. On the next decline observe a perfect secondary test and notice how the supply vanishes for one bar. I have to go to sleep so let me just say what I hoped to demonstrate. You as the chart reader must answer the question of what the support buyers intentions are. Is it to hold prices up to distribute more as the point and figure formations would imply? or is it to try to induce another major rally? Knowing this can change on a dime, I believe the former. Good night.

I am sorry, on re-reading this none of the labels came through.

Markets 11/23/09

Lets look briefly at the last two days. The flat area around 109.25 -109.02 quite simply is accumulation. We break out from there and weakly rally, making higher highs and higher lows. Today the market gapped higher, which means prices were raised without buying many shares. The spike up is a buying climax, after which prices were held in a narrow range for further distribution. Demand was evidently temporarily exhausted as prices fell the remainder of the day in a stair step fashion, with little ability to rally. No one could ask for an easier way to sell alot of stock at high prices than today's action.

It is hard to believe something could gap so much higher on such little volume.
9:55-10:05 was clear stopping action. The heavy selling overwhelmed the demand and exhausted it. At 10:15 find the evidence demand was exhausted. Notice the weak rally which can attract neither a following nor range nor ease of movement at 10:30-40. Notice how weak the rallies are the remainder of the day. Demand must enter to turn this market and so far there is not much.

Please observe the buying climax previously mentioned on the 1 minute chart.
Given the world wide possible top forming in equities, today's buying climax was a low risk place to go short, with minimal risk. In fact despite today's impressive advance, there has been little buying for days.

World markets 11/22/09

Compare the advance off the lows to the other charts below. All the other advances had the power to make it past at least a few of the congestion zones on the right. It is no wonder that this is the first market to get into trouble. See below.
Beginning in August this market became disorderly. It made both higher highs ans lower lows until the peak. About this time the ease of movement started to be greater to the down side than the up side and that has continued. Given the weakness of the last rally there is a good chance this market has turned.

I posted the American market for comparison purposes. However the last 5 congealed rows should not be interpreted bullishly. This sharp up down movement in a tight range after a long advance is the hallmark of distribution.



From August on this advance struggled mightily. It had a stair step like advance but it always fell deeply back into the preceding range and then had a sharp short covering rally. Behavior changed on the last decline. The DAX made a lower low for the first time since July and the short covering failed to make a new high. As such we have a potential down trend which will be confirmed by ease of movement down. With this kind of formation and distribution going on during the advance since August, the downward count can become tremendous.

For self instruction compare the chart of Brazil, our South American representative with the Netherlands. Brazil came no where near a new low in March for example. Study the amount of overlap and retracement etc; How many of the reactions are 50%?

The largest reaction is the one off the high at 67500 for 7000 points. It followed Brazil discussing a 2% tax on hot money entering its blowing off stock market. Since then the market upthrusted its high by one x and fell back into its range. This like all the others might easily be topping action.


Australia was halted by long term resistance. It made a higher high then a lower low in its present area of congestion. It closed Friday in the middle of its trading range.
Since September, this chart looks distributive. The down move from 4850 t0 v4550 was stronger than the immediately preceding upmove. Since then Australia despite all the bullish song and dance about commodities has failed to make a new high with the S&P. You can see on the daily that the last rally was stopped at the zone of distribution.


From the Euro zone this chart is essentially the same as Australia. I would just add that since August, it has struggled higher with each rally falling back into the previous zone of congestion. The decline from 328 gave back every x and as such marks a change in behavior as this is the first time this kind on thing has happened since March.
I posted these because all markets with the exception of Japan and China have been moving together and against the dollar, often during the day on a tick by tick basis. Hopefully the charts of overseas markets make our own stock market clearer. They will move together.

Please look on your own at the Nikkei, the Swiss, which is a direct speculation against the dollar, the Russian market( they want to put a Tobin tax on to stem speculation and it is the strongest market in the world.)