So have we made the long anticipated test of the lows? Please observe the weekly chart. The trend by Mr. Wyckoff's definition is clearly down with lower lows and lower highs. The close was at the lower end of the weekly range, volume was moderate given the holiday on 2/16. On the weekly chart we have no warning of a change in trend and it is unlikely that the trend will change without any evidence on the weekly chart.The three box reversal point and figure similarly shows an intact downward trend. All the rallies beginning with the rally from 112 to 127 look like induced short covering and undoubtedly we will get some more of the same but there is no evidence right now for a change of trend.
Moving to the daily chart, I have repeatedly pointed out the disappearance of demand for stocks, often followed by overwhelming supply days. To make a bottom I would like to see some evidence for the disappearance of supply. On Friday we had a small range, high volume day with a close near the top. Was demand overwhelming supply or did supply overwhelm a rally attempt? With this volume supply certainly has not disappeared. The inability to get anything but a few stops above Thursday's close makes me further doubt the former possibility. We are probably in a sell rallies mode. The small trading range we broke down from had a range of 7.90 points(87.95-80.05.) We broke 4.32 points beneath its low of 80.05, more than half the extent of the trading range. David Weis believes the furthest extent of a spring is no more than half of the trading range. In this as in all things I believe him. A spring therefore is unlikely.
The intraday chart confirms our hypothesis that supply overwhelms demand. At 75.77 a low is made with good stopping volume for the time of day. The ensuing rally has slightly more volume than usual.(Does someone know something?) At 2:15 an announcement followed by some made to order short covering. Supply almost immediately overwhelms demand with the two red reversal bars at 2:25 and 2:50. At 3:20 the demand is exhausted. During the three last bars of the day on a close basis we rally 0.4 points on 44 million shares. A large effort having a minimal result. Rallies again are sold and supply again overwhelms demand.
