Without being an I told you so, I noted yesterday that the effort on the final rally yesterday was far greater than the result. While I could not predict that the demand exhausted itself in the buying portrayed above, the lower opening was not a surprise and was a definite possibility. I wrote earlier in these posts that an upside breakout from our tiny trading range would be overwhelmed by supply and that happened yesterday.As has been described for the past week or so on an intra day basis, rallies were overwhelmed with supply but the active selling that would push prices lower never really kicked in. So we have the seeming contradiction that prices moved higher but supply was overwhelming demand on rallies. Perhaps this is one of the meanings of selling rallies, or it might a variant of selling on a scale up. I mention this because this is exactly what happened today, the rallies were actively sold.
So let's get to some of the details. The e-mini gapped down on the opening and continued to drop on good but not extreme volume. Demand on the first rally attempt, 8:45 and 8:50 was used up quickly and we then fell sharply with little resistance to make a temporary bottom on climactic volume(60,000 contracts.) Remember --exhausted demand leads to a sharp fall in price due to a lack of resistance.
At 9:05 the rally begins and from 9:15 to 9:50 the 5 minute bar closes are all around 854 +or- 1 point, supply is squashing any attempt to rally. We break through this small range to the upside with a minimal increase in volume. Prices fall back without making a new high for the morning and again attempt to rally. Demand is now exhausted as this wave has a volume of 21,000, less than the supply of 34,000 on the previous down wave. The small bar still under the 21 is a failed rally attempt. Its low volume highlights the exhaustion of demand and prices on the next bar fall easily on low volume. That there is little demand left to offer resistance to the move is further attested to by the next 3 bars. These small bars are all failed rallies, all have small ranges and two have low end closes. In such a manner we continue to drop until finding support at the level of the high of 1/26, shown by a narrow blue line.
To sum up, we opened lower and on the first attempt to rally used up demand and then fell sharply. We found support and attempted to rally with good volume as shown by the wave numbers in red(120,117). That rally met great resistance and despite the effort made little progress. Eventually demand exhausted itself and prices declined with little effort and little resistance. This pattern continued throughout the day and if it continues will define a new down trend.
THE TIME IS GETTING LATE SO PLEASE FOLLOW UP ON THE BRITISH POUND ON YOUR OWN. INTRA DAY WE HAD AN UPTHRUST--BEARISH-- AND ON THE DAILY SHORTENING OF THE THRUST-- ALSO BEARISH --AT THE RESISTANCE. AS EXPLAINED YESTERDAY THIS IS A VERY IMPORTANT CHART.
