MARKETS 3/31/09

Let's begin with one of the two daily charts. On the SPY for example, as noted previously, supply overcame demand beneath "C" and we fell back into the trading range with ease. Similarly on the 30th we also fell easily. We fell however to support at the trend line and also support at the level of the 2002 and 2003 lows(the blue line). This placed the market in a spring position vis a vis the high volume low of 3/25. Today we rallied with a gap opening off of that spring and tested the support line of the previous uptrend. The spring has failed so far with higher volume and a close at the bottom. We now need a large range high volume decline to seal the bear case deal.

Turning to the 60 minute pnf notice how well the green and red trend lines define the apex at the 80 level. This rally has also broadened the range of distribution to 11 boxes across the 80 line giving a potential low of 69. Any further additions to the count would push us through the old low at 67.

If we now look at the 60 min bar chart, I have already pointed out the potential spring yesterday. Please notice the small range bars that characterize the decline yesterday after the opening as well as the rally today. Today we were unable to rally into the zone of selling above 810 which is very bearish. Most important however is that if we look at the true range yesterday of the opening bar and the range on today's closing bar, they are the largest range down bars since the rally began. Unlike almost the entire rally, selling pressure can now push the market down. The ease of movement as we noted in the daily chart discussion yesterday and today is down. The factor which says not yet is today's rally went further than 50%.

Moving on to the 5 min point and figure, lets first look how well the lines work. Observe the area around yesterday's low. The market has entered a trading range between 78.5 and 79.0. We break to 78.1 in a possible spring and rally 5 x's only to fall back and make new lows twice each time by 0.1 points. Drawing in the fine lines on both sides of this small break below the trading range, hopefully you can clearly see that at the last x at 78.1 we are on the hinge for an up move. Moving up 6 x's, the largest upward move or line in the day confirms the bottom is in. We next rally to the resistance at 78.7 and then test the level at which we broke the small steeper red trend line with the last 0 at 78.3. From there we move up sharply breaking through all resistances. We now test the breakout by declining to the level of the breakout at 79.1. We move to a somewhat up sloping trading range bounded by 79.9 and 80. Note how the x's and 0's seem to flatten out here. This shows the pressure of heavy supply, or selling into the rally. The trading range is resolved with the successful spring at 79.6, which also enables us to draw our green trend line. The rally from here is sharp and furious. I mistakenly did not erase the entire typo on the chart and if you look at the 5 min bar chart you can see how much more above 80.5 and less than 80.9 (the scales are different but the relationship between the bars is the same) should have been erased. The last part of the sharp rally is almost immediately reversed and after a test of the highs which fails at 80.8 we then sell off sharply, ending about where we opened.

On your own find evidence on the 5 min chart for everything we discussed in the point and figure.

MARKETS 3/30/09

I just have a few minutes, so we must move rapidly. Unfortunately the intra day did not copy after my latest experiment in getting it to copy clearly. On the daily, the true range was from Friday's close to today's low @3.8 points on the SPY. This large range was accomplished on the same volume as yesterday, again showing minimal resistance to the downward move. This might also be a spring on lower volume. I doubt it, but time will tell.

The hourly pnf shows the breaking of the backbone of the advance which we described yesterday.

The hourly barchart also shows the trendline decisively broken but it also shows we are in a spring position. I expect that this spring like most bear market springs will fail.

The 5 minute point and figure shows shortening if the thrust and possibly a temporary bottom tomorrow. I might not even hold for one day.

MARKETS 3/29/09

Let' s begin with the daily point and figure. Note the shortening of the thrust that accompanies this rally. After the first decline from the 77 level the market rallies 3 additional points to 80 before reacting, then 2 additional points to 82 before reacting and finally 1 additional point to 83.

This shows the increasing resistance to the move and at the red "0" we are on the hinge. If one looks for a moment at the 15 minute bar chart, the hinge is between the supporting trend line and the reverse trend line drawn through the last two tops.

Turning now to the daily, before this week volume was lighter on the rally than the preceding decline, with a surge on the 18th, followed by a reaction in which volume sharply declined. That was last Friday. This week we had three days with heavy volume and almost all the closes were in a narrow range. This would imply that supply is overcoming demand. Monday had a very large range and prices went to a new high for the move, however volume did not meet the standard of the 18th or 19th. There is less demand. On the 24th there was no follow through. On the 25th the market found support and rallied off its lows with good demand, heavy volume, on the rally. Thursday was a narrow range day with heavy volume. The volume is heavier than Monday and the range narrower, showing increased resistance to the move. The gap down opening on Friday shows that supply was overcoming demand Thursday. The true range on Friday was adequate although the actual traded range was the smallest in months. We moved down easily, with little resistance. This opens up the possibility that buying powerhas exhausted itself--no demand. When we finally get to the intraday 5 minute chart, we will be looking for evidence for or against that possibility.

Please now look at the hourly point and figure chart 1x1(it has blue, red and green lines) As usual if you drag it to the desktop, and then double click it, you will make a zoomable, even if fuzzy, image. Firstly, look how well the trend lines work on this chart. There are two possible green uptrend lines. The first has already been broken and we rallied up to test it and fell back an "0." The second possibility, the lighter green line, emphasizes the hinge we already discussed. If we break three points from here, the back bone of the advance is broken.

The other very nice thing about this chart is that it is countable. Above the upper blue line there are 19 x's and o's. Subtracting 19 from 87 gives us 68 and from 83 gives 64. Our downside target was between 64 and 68. There is a better count at the low, besides the lower blue line, which I just noticed. The 11 boxes across 72 give an upside count of 83. If we rally further then we will use the count above the blue line. The 11 boxes across 72 give an upside count of 83 which we have accomplished. We can now count 6 across 82 giving a target so far of 76 or 77.

Looking at the 5 minute 3x0.1 we have had our first series of lower highs and lower lows that was not almost immediately reversed.

I am sorry but I cannot make the intra day wave volumes legible. I broke the chart up into two halves hoping to make it more legible but it did not work. If it were possible I would have shown how each advance during the day was sold heavily. So I am going to sleep.

MARKETS 3/26/09

Let's begin, the market by its own action will tell us the story. The 3x point and figure, shows a possible bottom to be in and the trend is sharply higher. There is a count herewith 6 across the 78 line showing a possible move of 85 to 96. (6x3=18 67 + 18=85 78+18=96) And that is for starters. The count can expand hugely with the increase in price because of the zig-zag nature of the decline.

The 1x point and figure looks more like an attempt to move through resistance than distribution. The minimum count on the 1x is 83-84.

Please turn your attention to the daily chart of either the SPY or SPX. Both show that yesterday we tested our penetration of the downtrend line and the rallied into the close. We must now look at the volume on the previous day as lack of supply. The lack of supply and successful test are very bullish behavior. Today on a high volume we closed at the top of a narrow range. Although some might call this supply overcoming demand, I believe that this represents absorption of overhanging supply, especially as 3 of the last 4 closes have been in the top of the

daily range. Regardless, if we gap down into the trading range of the past few days then we will know this day to be supply overcoming demand.

The hourly chart shows a strong intact uptrend. The only caveat is the possible shortening of the thrust.

Please turn your attention to the 5 minute chart. After the strong rally into yesterdays close we gapped up to open this morning and then sold off far less than 50%, with volume receding with price. From the 31/1 wave volume we rally over 3 hours making a new high by a biscuit. Prices again react this time for about 1 1/2 hours and buying kicks is from the bottom of the retreat. This leads to a buying frenzy into the close.

Clearly demand has not evaporated and until that happens as in the top in early January or Feb 9, the bias will be upward.

(While a bit outside of our usual purview, I also posted a chart of the spx where the red line is the euro fx close. I believe one can easily see how the two are moving together. I believe that the spx is the dependent variable here and one can rally the spx by tanking the dollar.)

MARKETS 3/24/09

Having moved through resistance and the down trend line yesterday, today we retreated, testing the resistance line and the trend line. We did so in the spx on one of the lowest volumes all month. The SPY had the lowest volume for more than 1 month. Either the low volume was the absence of supply on a test or it is the absence of demand at the to of a move. The low end close might support the bearish interpretation but there is nothing certain about that. So let's be very specific, the question is whether the support at the old resistance line about 800 will hold and we retest the high of this move and perhaps move yet higher or whether 800 will give way.

Looking at the hourly chart, in general, we see the line through the tops is angling toward parallel which can be the sign of a top. Please look at the hourly chart of the SPY and notice how often in the upward trend that the closes in the reactions are mostly contained by the large upward bar which precedes the reaction. This shows little pressure from selling. Today we broke through the low of the 100 million share bar that was the last bar and buying climax yesterday. The only other time we did this on this upward move was after the buying climax on the 18th and 19th a few points ago. The selling pressure is increasing at this level.

Unfortunately, I have to go to bed and cannot finish with an analysis of the 5 min chart.

Today's action, decisively breaking the trend line on decent volume puts the down trend on the daily chart in jeopardy. On the intra day 5 min, the strength of this move was unmistakeable. Selling was unable to pressure the market at all. Unfortunately, the move up became vertical and the volume extreme. Either this is breakout volume or climactic. The lack of selling pressure so far would lead me to believe that this is breakout volume.

MARKETS 3/18/09

Lets go through the details. Looking at the SPY daily, we broke through the trend line on high volume. This puts the down trend in jeopardy. On the other hand perhaps today was climactic volume. Looking at the last chart above, an hourly going back 7 weeks, today witnessed the highest hourly volume on the chart, in fact the highest hourly volume going back to about November. Looking at the more detailed hourly, that high volume bar is clearly a reversal bar.

On the futures, we have not penetrated the trend line, nor the resistance lines. So clearly the long awaited supply came into the market today, and it did so in a definitive way, high volume.

On the other hand, perhaps today was a high volume breakout. To answer this question lets look at the 5 minute chart.

Please look at the first large up bar on very high volume we close in the middle. Great Fed news-- close in the middle. Selling into the advance does not stop the next bar from closing at a new high. However the gains are rapidly returned over the next 2 red bars ending at 150. The next rally further exhausts the buyers and the day tops on a relatively small bar that closes at the low. Demand is shown to be exhausted underneath the red arrow and we fall 16 points in a few minutes. This is the largest hourly down bar since the rally began. The rally into the close is on very high volume and over several bars manages with much effort to recover about 50% of the drop from the top. So let' s see what kind of follow through we get in the a.m.

Just in case one thought Mr. Wyckoff dated, lets summarize this move so far. The rally began on the day of a horrendous unemployment report. On that day the big money, who has been helped by the fed so often around options expiration was tipped off that because the report was so bad, two days before options expiration, the fed would announce quantitative easing. And they began to buy calls. Note how low the put/call ratio was at the bottom. On March 6-9 it was at the low levels one sees at a top not a bottom. That is how intense the call buying was. Today we saw the selling on the news. What seems important is that the big money did not buy stock, or etf's, or futures. They committed to a news item not to a turn in the market. That is why the put/call ratio fell to a very small 50%. Next time I see such a paucity of supply I am buying calls especially if the put/call ratio is so low. Almost 25% in 10 days is not shabby.

I want to cover a lot in tonight's blog. On our 3x point and figure we have retraced the normal 50% according to Mr. Wyckoff and have inflicted maximum pain and losses to anyone who shorted indexes or bought puts for the break of the November lows. The trend remains down but the shorts as is typical are suffering enormously. On the 1x1 point and figure we are coming into resistance/old support and we will have to examine our other charts to see if we will have the strength to power through.

Looking at the daily chart of the SPY, we have moved up through the resistance of the November low and are nuzzled against the major trend line and the old 2002 low. Will we have the strength to power through? Volume has diminished for the entire rally. Today we took out yesterday's low and then its high closing above yesterday's range on the same volume. On the surface this would be bullish, but the failure of volume to expand makes me suspicious. This could also be shortening of the thrust. We will need active buying to get through the old resistance and trend line and so far it is not here.

Please now look at the hourly chart, of the 24 hour futures. The rally so far has been nicely contained within the red and blue lines. Yesterday we failed to rally close to the blue supply line for the first time since the rally began. We topped on shortening of the thrust at 771.25 and then had the largest decline since the rally began. We now have some evidence that supply has entered the market and is pressuring it. Moving sideways, we create a trading range overnight and then have a spring this morning. The advance is choppy until the last two hours today when we lift off vertically. So far we have failed again to reach the blue line and must wonder about shortening of the thrust( the declining amount that the blue resistance lines are penetrated.) This sharp move coming at the end of a large rise in the averages makes me wonder if we are seeing what Mr. Wyckoff would call hypodermics. Regardless this steep advance at the top of a large rise looks climactic or the beginning of a buying climax. In addition prices might be beginning to roll over in Wyckoff's terms. The alternative is that we are absorbing through old support and resistance. Time will tell.

I am running short of time. On the 5 minute intra day please note that yesterday's supply did not carry through at all. Very few supply waves have volumes in the 3 digits. Demand is not particularly notable until the blow off in the last hour or so. That rally of 12 points required 370000 contracts, heavy selling into the advancing prices.

Finally please observe the euro charts and perhaps we will discuss them tomorrow.