The e mini gapped up on the opening and opened above the 813 support/resistance level. This was enough to tell any short term trader to get out of at least part of his position at the earliest convenient moment. After the opening we went down on high volume, tested the low of yesterday and then rallied weakly. The upthrust at 12:10 I believed was a shorting opportunity only to be proven incorrect a few bars later (12:35) when the market had a resurrection bar, reversing and closing higher than the previous bar. From this point forward, whenever the market needed help in overcoming resistance, it found the aggressive bids only to rest and then push higher on more aggressive bids. The day finally ended with a very large volume short covering rally.
Unlike previously, the financial stocks also found support today, I should say the american financials as the large british banks recovered the previous day's loss minimally. With today's rally the zone of support spreads out to 4 or 5 days and some kind of rally is possible. Volume and demand have waned on every rally since this trading range began in October. The small rallies on this decline in particular seem to me to run into way too much supply to have a large advance. If that supply should disappear and demand not evaporate...
Earlier I mentioned the large British banks. As is well known they may be nationalized wiping out shareholders. In addition Britain faces a currency crisis with the pound nicking its lows of the past 20 years. To emphasize the importance of range, which we discussed in dx chart, the august range from high to low was the largest in 20 years. Approaching the 20 year lows with high volume and a large range means they will most likely give way. Whether this banking and currency crisis opens a new chapter and dominates the American stock market or the bullish forces at work today continue to win in the days ahead is yet to be seen. Remembering the large range in the dx, perhaps this new chapter in the financial crisis will spread to this side of the Atlantic.
