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.
