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.)
