Today was an interesting day, so let's begin. Looking at the daily Spy, the volume has been low for almost 2 weeks and today was the first time in a month that volume increased on a down day. The low volume for this long at the top of a move clearly demands some sort of explanation. Clearly it is lack of buying power, the buying power having been exhausted by one of the largest swiftest upward moves in history. Until today there was no evidence of supply entering, but today on slightly higher volume we closed on the lows and beneath the low of yesterday. Moreover we closed directly on our multiply tested trend line. Caveat emptor.Moving to the 3x point and figure I count 16 rows across the 81.7 level. 16 x 3 x 0.1=4.8. 4.8+81.7=86.5 for an upside target. Not bad, that is right on the nose. We will see if other counts work as well on this chart. Remember on the hourly Spy pnf we had a count of 20 across the 75 line giving a possible target of 87.
The upward spike and reversal from 84.5 I commented on yesterday continued this morning. The market found support and bounced from its old support at 84.6 and retracing more than 50 percent. It lost that entire gain and then some more, bottoming at 84.1. The next rally was exactly 50 percent on the pnf, a sign of weakness, and the market closed near its lows.
Looking at the 5 minute bar chart, 1 is notable for the lack of a selling climax-- no stopping action, just a bounce and a relatively strong one from old support. The market drops easily from 2 to 85.0, demand has been exhausted by the sharp run up to 2. This is confirmed by the minuscule volume on the rally to both 3's. Demand exhausted, the market falls rapidly at 4. It then struggles painfully to one of the few buying climaxes at 5 and it is not much of one. Support comes is on the mid range close, high volume 6's.
All in all today was characterized by easily exhausted demand and some evidence on the gap down opening after an upthrust and at 4 of strong selling pressure and down ward ease of movement.
We have yet to see a wide open down day with high volume.
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