As I stated in my addenda yesterday, it occurred to me driving downtown this a.m. that i had not expained the peculiarity in yesterday's chart --that the market was supported in such a way that shorts never got the chance to get out on a normal reaction and buyers never got the chance to buy on a normal reaction let alone a spring. If someone wanted to buy for a significant turn, they would pull their bids and let the market drop, not purposely squeeze shorts. Today we again witnessed support repeatedly in order to squeeze shorts. In addition since players could count on support, those that wanted to sell loaded the supporting buyers up. But lets do the details.The point and figure chart shows nothing more than a normal reaction. This could become something significant but so far it has not.
The daily SPY has increased volume with a narrower range and a close in the lower half of the daily range. Supply was greater than demand. Moreover the index rose above the high for the two previous days and closed lower, again indicating supply was greater than demand. So far the bears are carrying the field.
As we noted yesterday the selling into the advance began at 6 and continued until D. This distribution prepared for the early morning drop that erased all of the gains of that rally in about half the time. Clearly supply is stronger than demand. The market finds support at 1 and 2 and again runs into significant selling at 3. 2 bars after 3 we clearly fill buyers on the way down. We of course make a higher low at a support line so the supporters do not have to take in all the stock that would be below 2. The purpose is to support as cheaply as possible and not to accumulate stock. When all of the stock below 756.75 is taken, short covering begins again up to 4. Supporting stock and other stock is pressed on the market to 5 and 6 giving back essentially the entire rally. 5and 6 are a higher low so again not too much stocks has to be taken in to support the market. Stock is again accumulated until short covering begins and then culminates at 7and 8. We upthrust and run out of demand. The support stock and other shares are now thrown back onto the market in a high volume 20 point decline into the close. This is true distribution. Watch out below.
