MARKETS 4/30/09

We will go through the daily chart and the point and figure rapidly in order to concentrate on the intraday, which we have not done in a while. The daily Dow again made a new high on low volume, as if to say if you didn't see it the first time, I am doing it again. Today however the volume contracted and the close was near the low and lower than yesterday, making it a reversal day. The inability to generate demand with a new high is now confirmed. Supply overwhelmed whatever demand there was.

The point and figure chart is definitely on the hinge at the re "O". The count across the 870 line is 10 boxes for a target of 880 to 870. Of course that can increase but it is a nice 50% of the gain of from 670.

Turning to the intraday, the steep rally to 1 on very heavy volume looks like the beginning of stopping action and the subsequent bar , closing below the bar labelled 1 and the two previous closes on high volume confirms it. There is no follow through and it takes at least three bars to recover from the down bar's damage. When the market breaks into new high ground at 2 we are immediately hit with supply as evidenced by the mid bar closes and heavy volume. The market falls back about 50% to 10:20 and finds support with heavy volume and a high end close. There is a spring at 3 (10:45) confirmed by the strong next bar. At 10:55 the range narrows, volume increases and the mid range close all show supply is still present at the previous high. The red bar at 11:05 closes near the top after taking out the two preceding bars lows. This small sign of strength, while not receding in price even 50% of the range is enough to propel buyers into pushing prices to a new high. Unfortunately not many buyers rushed in, so volume did not expand. There is a nice reversal bar at 4 and on the subsequent bar we fall clearly back into the trading range. 11:25 has a small range at a level where the market was previously supported and at 11:30 we rallied to the green line and failed miserably on increasing volume and a low end close. Until 11:45 we hug the lows of the little green and red trading range, telling us we will go through the bottom. At 6 we do this decisively, supply overwhelming demand. From here until 6 you can trace out on your own, bar by bar. At 6(which is a buying climax) we begin 4 red bars each with a lower high, low and close than the previous one. This is the only string of so many down bars in a row and at 7 we have the expected selling climax. This is confirmed by the strong move with volume at 1:30, also penetrating the trend line. Until 2:10 the increase in volume on the rally is inconsistent and at 9 a buying climax. The rally at 10 shows demand is exhausted and 11 is another selling climax.

All of the closes inside the square at 12 are about the same and volume is high. Supply is overwhelming demand and I expect lower prices tomorrow.

Unfortunately I cannot annotate charts tonight. I will do the best I can. The drill begins with the daily bar chart to determine the trend. Today we advanced into new high ground, closing beneath the low of 4/17 and the volume died. We are at the danger point and there is a tremendous warning in the close and the volume that the up move might not continue. It is hard to believe this volume is correct but we have no choice but to believe it.

MARKETS 4/28/09

The daily Dow pretty much remained in the middle of April's price range. The day had a narrow range closing in the middle on light volume, but slightly more than yesterday. This swing to the middle can be seen on the two spx point and figure charts above. Our job here is to try to determine which if either side bulls or bears has the advantage.

On the hourly support came in at the trend line and resistance at 86.5 an earlier high price. If we look at the 1X3 pnf the current hinge is clearly displayed as it is in this hourly chart. Again not much help in finding an advantage.

The 5 minute bar chart begins the day with yet another steep short covering rally which even has a 12 million share spike in the middle of a trading range. As shown by the 11a.m bar this rally exhausts demand. The market does not however give back all of its short covering gains as it did so often in the previous few days. Instead we are supported at the old support line around 85.5. Clearly the force of supply is not as great as after previous short covering rallies.

The two red parallel lines frame a trading range which is upthrusted to "O" in what is probably more short covering. Here the short covering volume was lacking implying such demand is waning and the supply into the close also has more power. The last 4 bars of the day are support coming in while in a spring position.

It seems to me that the weakening of supply is telling and at the very least tomorrow or overnight I would expect the last rally to complete the megaphone not drawn that includes the two rally peaks. We must see if we can develop any demand that is not short covering.

Please enlarge and click on the chart of the daily Dow. The average remains in its trading range. Today was an inside day with very low volume and a low end close. Volume today was almost half of what it was 5 days ago when this small uptrend began. We will have to see whether today was lack of demand at the top of a trading range or a lack of selling on a down day. Inside days can be very hard to evaluate.

The point and figure of the Dow in addition to all that we noted yesterday has come to an apex, possibly, which holds the possibility of a move. While somewhat supported on the hourly pnf chart of the SPX, the apex is clearly visible on the 5 min pnf of the SPY where each box is the average true range. Note the clear apex at 86.06. We have a clear pattern of lower highs indicating increasing selling pressure. The last rally to 86.32 was 50%, so the average is hugging the lower half of this small 2 day range. A break can be anticipated at this point.

Please open the 5 minute bar chart. I continued labeling the short covering rallies. Today they managed to move the markets to two lower highs with less volume, drama and histrionics than Friday. The decline from 87.01 to 85.54 was orderly and determined selling accompanied by gradually increasing volume. After the selling climax at 85.54 there are a t least 2 and possibly 4 sharp short covering rallies forming our friendly megaphone. These buying sprees are clearly stuffed and if you go through the last two hours bar by bar you will see the selling is greater than the buying. From noon on then the selling dominates the buyers. The short covering does not seem to be able to hold the market up much longer.

MARKETS 4/26/09

So let's begin with the daily Dow. I believe this has the volume of just the Dow component stocks and as there is the possibility that the volume in the SPY is tainted by being difficult to borrow we will switch our index for the time being. This one is plagued with C and AIG and GM which are almost penny stocks. However the Dow has led most moves in the past year. The entire month of April has been spent in a trading range between 7800 and 8080. All but two closes have been contained by the range of April 2. Beginning on the 13th the selling on declines picks up and the rallies in this trading range have weakened. So we broke on Monday and took out the previous 6 or 7 days' rally, surely a sign of weakness. But the market finds support on 4/21 with even heavier volume but less range, absorbing all the offerings. From this strong showing the rally fails on 4/22 and 4/23 is a successful test of Tuesday's low. Unfortunately the rally form this test was the weakest, on the lightest volume, of any rally in this trading range. It is unlikely that this level of buying power will punch through our 8800 resistance unless something changes. In 4 days we were unable to completely undo the damage done in one. Instead of volume building in the few days preceding an upward break we are seeing the opposite. Because of the tight range and the small retracement of the previous move up from 6400 and because the volume on declines has not decreased and the volume has not swelled on the last two advances we must rate this trading range neutral to bearish from the daily chart.

Looking at the 60 min point and figure of the Dow you can easily see the trading range at 8050 and 7800. The count across this trading range is huge at potentially 24 at 8050 or 1200 points. Friday we again tested the uptrend line now at the 8100 level.

Please look at our current bell weather stock, gs. It continues to be out of step with and weaker than the market. This tells us that supply is pressuring it so on your own please go bar by bar and find the evidence. Then you will have certainty that since the blow-off to 130 supply is in control. The upthrust on Wednesday would not have been hard to catch.

I believe the intraday 5 min of the SPY tells a more complex story. The rallies labeled A-G are all clearly short covering. That on this intense demand we have not broken out of the trading range means that this demand is being filled by sellers. Look how rapidly the market can fall when the short covering ceases for a moment and then the shorts immediately buy again. When the short covering exhausts itself, there will be no demand left.

The same story is told by the 5 minute pnf of the SPY. Remember that Mr. Wyckoff that long narrow ranges on the point and figure can be supply overcoming demand. Such are the lines around 86.8 and 87.1. The sharp breaks thus make sense. Although the market is moving up it moves down much more easily.

Finally please for a change look at the monthly gold chart. In the past two months of declining prices. it does not move down easily and thus could become wildly bullish.

MARKETS 4/23/09

There is a problem in these charts. Please begin with the daily. On 4/20 the market had a wide open break, perfect in every way, even predicted by this blogger, except no significant volume came in. 4/21 was a reversal day and volume increased. 4/22 another reversal day on still higher volume. 4/23 yet another. All of the closes for the last three days are in a narrow range and sometimes I think this pumping action of up-down is a type of ending action. Clearly supply was unable push the market below Monday's range. Unfortunately there is a rumor and it seems supported by the charts that the SPY is on the hard to borrow list for short selling. See the blog ZERO HEDGE. This is why there was no volume Monday and it explains the intra day movement we will discuss shortly.

First lets look at some point and figure charts. Let' s begin with the 1x1 of the 5 min spx. Note how the thrust shortened from the low at 838 to the low at 836. We rally to 839, revisit 836 and then rally 5 "x's". There is now more strength than weakness and the market rallies to 847.

The last column of that rise is a spike which is retraced in the next column almost in its entirety. There are two more spikes before the close. I believe that this unusual behavior is short covering . And that is odd inside a trading range.

Finally please turn to the 5 minute bar chart. Note the sharp move from c to d 4/22. Sure looks like a short covering panic. The final move to 85.42 on 4/23 looks similar but is even steeper and the move to 2:40 on 4/23 is a little sister to the other two moves. Balancing these sharp moves-- we had true supply into the close 0n 4/22. Fortunately for the bears as soon as the short cover is complete the market seems to give all the gains back....so far?

ADDENDUM:In spite of this trumped up buying, the market has not gone to new highs. This would imply that supply is greater than the trumped up demand.

MARKETS 4/21/09

Since i do not have any time this evening, I just want to make one observation, actually 2. First the upmove today was out of heavy buying in the futures, which is very unusual. Second, from the spring at 6 to 9 the market moves up 10 points. The buying pressure is clearly greater than the selling pressure and the ease of movement is up. In spite of this we move 1 point in 1+1/2 hours. The effort does not equal the result.

MARKETS 4/20/09

I believe I said yesterday we should see some action soon and today we did. Selling pressure began to dominate buying power as I commented on in the intraday discussion last night and that trend continued today.

Enough of the self kudos, lets begin with the daily chart. Today the widest down bar since the rally began closed below the last 6 days closes on moderate volume. That the volume was so moderate tells us that we fell on lack of demand and that huge lines were not being pressed on the market. The lack of demand has carried over from the latter part of the upmove. Lack of demand can move the market quite a bit just like lack of supply.

If you look at the hourly bar chart, please notice that we closed in a possible spring position. Every bar since the last two hours Friday has closed on or about its low.(The long tails up to 85 are misprints.) This weakness makes a spring unlikely.

Turn to the hourly point and figure. Because of the misprints on the spy I am using the spx. 3 "0's" down is the largest down move since the end of March and as such a sign of weakness. The count of 4 boxes or 40 points across the 860 line calls for a minimum decline to 820-830 and as pointed out yesterday, this count can become very substantial very quickly.

Finally, let's turn to the 5 minute bar chart. A glance tells us there was no rally power all day. If we eliminate misprints, no rally was more than 0.5 points. I have labelled three bars. All three were relatively higher volume than the bars preceding them. Bar 3 contained almost all the closes of almost all the bars which came after it for more than 1 hour. The same can be said of bar 1 and bar 2. That these bars could contain the rallies that followed them is strong evidence of a very weak market.

MARKETS 4/19/09

The only difficulty with these charts is that they seem so obvious, it is hard to believe it could be so simple. Beginning with the daily SPY, we have come to an apex, both the one shown by the red and green lines and also from the undrawn line across 87 and the green line. On the move into new high ground Friday, the range narrowed, volume shrank, and the close was well off the highs but still in the upper half of the range. Since 3/23, four weeks ago we have moved up 5 points and the thrust has shortened again. We have many symptoms of absence of demand but no supply has kicked in. Now we are at an apex, so we may rightly expect action soon. I uploaded a chart of bgu to emphasize the low volume. Goldman's chart shows that at least one ot the old leaders looks tired, similarly with xlf.

Let's imagine for a moment that much of this upmove which went nowhere for a month was distribution. If so when did it begin? It goes back at least to 3/25, 26 and perhaps a week earlier. This makes quite a bit of distribution and will become important should we be called on for a pnf count.

Let us turn to the hourly pnf. What makes this interesting is how rapidly it can expand should prices fall. For example look how large the count could be across the 80 line. In other words, if supply comes in, there is the possibility of a substantial decline that could easily test the lows. Much depends on the "if."

Turning to the hourly, it clearly shows where distribution might have begun on the 18th. Further it emphasizes the wedge and apex as well as the shortening of the thrust. It also shows that we have had no substantial down bars.

Finally please turn to the 5 min bar chat of Friday only. Observe that at 1,2,3 the down moves have more volume than the preceding upmoves. This the first selling pressure since 3/19 and 3/20 and is perhaps the beginning of the much awaited supply. At the apex, we are beginning to see supply.

MARKETS 4/16/09

I have uploaded a lot of charts and I am not sure I will get to all of them. First the daily SPY, today we made a new high for the move, still with a relatively narrow range and although volume rose, it was not up to the standard of earlier in the move. The close, at the high end of its range, I do not believe was in new high ground and it certainly was not in the futures(not shown.) This low volume rally can only resolve itself with volume, one way or the other. The lower volume is further confirmed in the BGU. Also look at the volume in the spx and remember that a bit more than 1 billion shares was the trading in 2 probably bankrupt banks.

Today I thought we might look at the charts of the two largest sectors in the spx for a clue about where it is going. Please first look at the xlf- financial index. The line drawn in is the spx close for comparison. The first week of april the financials are weaker than the index not making a new high with the spx and volume has dropped off even more radically. Last Friday we gap up on high volume, stronger than the market and on Tuesday the sell off has even greater volume than Friday's gap up advance. The market however stays above its previous trading range unlike the spx, showing strength. The rally two days ago is on weak volume and today the narrow range and lower volume quite possibly forms a secondary test. Giving credence to this possibility, the xlf has again fallen out of step with the whole market index we have chosen, the spx.

Goldman, GS has been one of the market leaders, as can easily be seen by comparing the charts. It penetrated its January high early in February unlike the market which still has not done so and it never made a new low in March, instead emphasizing its uptrend by making a higher low.

It too is now weaker than the market after a very high volume sell-off and possibly making a secondary test.

JPM announced earnings today and with a narrow range and high volume failed to make a new high.

Clearly the financial sector might be losing its leadership mantle and might even be in trouble.

The XLE is in even worse shape, failing to respond to strength in the spx for the past month. Volume has dried up, its range has narrowed and it has moved out to some kind of apex.

The next big volume wide range move takes all the marbles.

Before jumping to bearish conclusions, please look at the hourly pnf 1x1 and notice that the uptrend is still intact and without a good down move soon there is the strong likelihood that all of this weakness we have commented on is absorption of overhanging supply.