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.
