Today the spx fell, with a wider range to a low end close, on one of the lowest volumes of the year, closing a little above a trend line. Is this low volume lack of demand or lack of supply?As we noted a few days ago, we are rising on diminishing demand and even less supply, then we faced the possibility of rallies that failed two days in a row. In other words rallies that could not muster the demand to continue the upward move. These invite heavy selling and what we are missing to confirm the above is a wide range heavy volume down bar. So is the low volume lack of demand or lack of supply?
To answer this question we will study the 5 minute chart of the spy. I have enclosed additional charts that you may feel free to peruse and with the 5 min point and figure please examine it with the same question in mind.
We open lower because of heavy selling in Europe and Asia overnight. Selling pressure is exhausted at 10:05 and the rally begins. At 1 supply begins to overwhelm demand. On the first bar there is a mid range close and the second confirms the supply with a narrow range on about the same volume. The SPY spikes to 2 and the reaction following has no volume. On the rally to 3 demand is clearly exhausted as shown by the inability of volume to even approach its former low standard and the rally fails. That we have not even reached 50% before demand is exhausted emphasizes the weakness. The rally to 4 uses up more buying power and further exhausts demand as shown by the two narrow, very low volume bars following. Note the ease which the market falls back down. Before 5 whatever demand existed is exhausted and the market falls easily with little selling pressure to 6. The market then hugs the lows, again evidence of little buying pressure until the spring and hinge at 7. Minimal volume off the bottom fails to confirm the bottom is in. The single bar spikes at 8 and 9 fill up the buyers such that neither bar has any real follow. Supply kicks in at the last three bars and perhaps is a harbinger of what to expect tomorrow. Demand on this chart is clearly exhausted and supply picked up at the close.
