Let us begin with the weekly chart. The long term trend is down, but for practical purposes that does not help us very much here. I would add one interesting note. We have just moved up as many weeks as we moved down from 2/09, but we have not recovered the entire loss in the same time period. As the volumes appear to be about the same, this would imply more resistance to the upward move than meets the eye on the daily chart.Moving to the daily chart, what is absolutely missing is a high volume, large range, down bar.
Volume peaked with the announcement of quantitative easing 3/16. Volume dried up on the high of the 27th but selling pressure was absent on the next two down days. The buying 3/31 and 4/1 was similarly weak. On 4/2 volume surged but the range contracted and again on Friday supply could not pressure the market at all. What we see then is diminishing demand and even weaker supply. The lack of supply can trigger explosive bull moves.
The 60 min pnf shows the same phenomena, the upward thrusts have been diminishing as the move has progressed but the upward trend remains intact. The last red "O" on the chart is a misprint. At 80 the market is on the hinge and moved up 5 "X's", supply drove it down 1 "O" before it recovered the loss. Supply is pitiful.
The 5 min pnf shows that the decline that began on 4/2 never really developed any momentum. Ending with 4 o's down at 82.7, that decline was immediately recovered in the next two rows. Selling pressure roughly equals buying pressure. The bottom is then tested, and the flattening of the move with 3 o's at 82.8 shows that the pressure of supply has abated.
At 82.9 we are on the hinge and a fairly strong if small up move follows.
The decline from 83.7 is less than the normal 50%, but the rally that follows up to 84.1 struggles more that the rally to 83.7. At this point the market is interesting because we have the possibility of making a lower high. With the exception of 1 o and 1 x most of what is below the red line is misprint. From that last O at 83.4 we have our strongest up move of the day.
Clearly the demand is greater than the pressure of supply.
We will go fairly quickly through the intra day. 1 is a high volume bar that has the possibility of containing hidden demand--heavy and invisible buying on a scale down. This possibility is increased by the reversal bar at 2. At 3 there is a spring with higher volume and less range than the previous bar and a high end close. Demand might be overcoming supply. This is confirmed by the obvious buying pressure on the following bar 4. It too has a high end close but with higher volume and a larger range. That demand is now tested until bar 5. By 5 the supply, volume, has clearly dried up. The lack of supply here as is possible on the daily triggers a strong rally. Note how much stronger this rally is than the preceding decline. It ends with supply at 6, the bar after 7 and the upthrust at 8. At this point in the day, demand is stronger than supply. The direction with the least resistance is up. That the next reaction goes less than 50% of the rise would confirm this for Mr. Wyckoff. It ends with the spring at 11. The gradually increasing volume on the move to 12 is a bullish indication, as is the sharp decline in supply, volume, over the next 2 bars to 13. The support line at 83.60 is successfully tested and we move quickly to the 84.10-84.20 area. Here are 3 closes with in a fraction of 0.1 points indicating supply is overcoming demand. However the volume, running essentially under 4 million shares in five minutes, never reaches a number which would indicate serious selling or distribution.
Nevertheless we decline through our trend line. At 15 supply has dried up. From 3:05 to 3:15, the market is supported, not moving despite higher volume. At 16 there is a spring and the heavy buying afterwards.
Remember the 82.90 is a misprint.
I also threw in tonight a chart of the gdx which we analyzed much earlier in this blog as the gold stocks were the upside leader. Note how it went from leading the spx to lagging to finally breaking away totally and declining while the spx advances.
