Tonight's note should be brief. My point and figure did not update and I wanted to show the chart of the Dow because I believe it is more indicative of the state of the market as it is not weighted, so weights do not decline with the declining price of a given component. On the Dow we had a classic back up to the ice and the question is whether it failed to penetrate the support/resistance line drawn and a new down phase is about to begin.
To answer that let's look at the intraday chart. It is clear from just a cursory inspection that we do not today have the kind of support and front-running we had yesterday. If there was support it occurred overnight before the employment report. Please look at yesterday's action. I went back and drew in some red arrows, after 2, between 3 and 4, and after 6. These arrows show bars where after support has come in, the supply has pretty much dried up. A rapid and swift mark-up confirms the lack of supply. The pattern changes at bar 8, also marked by an arrow, but pointing down. At bar 8, demand dried up and was followed by a swift 20 point decline. This change in behavior continued into today and please observe the 5 small downpointing arrows after clicking and enlarging the chart. Each of these arrow marked bars is followed by a decline on high volume. This reversal of behavior, the exhaustion of demand, marks in my opinion a change in trend. Further, I expect that this new trend will last a long time and is the beginning of a large and important move. In many ways what we have seen the past two days is the essence of Wyckoff's theory of supply and demand determining stock price. Compared to the amount of work it took yesterday to exhaust supply, it took nothing today to exhaust demand.
