Markets 6/29/09

With these low volumes we are rising with little demand. It probably does not matter. On CNBC today there was an open discussion of how these markets are manipulated by the government. I did not hear anyone disagreeing or saying that that was outrageous. We are testing the underbelly of the first two weeks in June and with this tiny volume in a normal market I would say that going through this resistance is not the way to bet. On a few thousand contracts we can do so in Asia tonight guaranteeing a wonderful trading quarter for whomever. Sadly, that is the way to bet.

Markets 6/25/09

It is unfortunate that on my return to blogging after a short hiatus, I feel I should say almost nothing about the daily or intraday charts. The reason is that the volumes do not make sense and the price action on the intraday although complicated to explain and I will not do so, also does not conform to typical behavior. The intraday shows almost panic buying where there is no reason to panic. The Spy volume was the highest in two weeks and around the highest is 6 weeks. The Futures volume was the second highest in a month. The spx and indu volumes were at the lower end of their ranges.(see above) These relative numbers are so discrepant that the price and volume action cannot be consistently interpreted. That being said I will hazard a guess that the etf and futures volumes are too much and a price reversal is pending.

Looking at the pnf, where volume is not involved, in the spx we have backed up to support/ resistance as the theory says we should and more importantly, as I frequently said we would, we have added cause.

Although I rarely discuss the news, if you care to understand why such blatant manipulation might be going on, and my raw number sense says that these volume discrepancies are so extreme that statistically they should occur once a millennium or so by chance, please read Alan Greenspan's article in today's Financial Times where he explains why higher equities are so important to the financial recovery. Somehow I remember him saying almost the same thing in 2002 and 2003 about higher real estate prices.

Markets 6/22/09

IPSA RES LOCQUITOR

Markets 6/21/09

We are now playing for a major move in the indexes and as such will de-emphasize the intraday 5 minute chart. After the upthrust to 96.11 the index moved down easily, bottoming last Wednesday. Since then we have seen an inability to rally which confirms our theme of last week. No Demand. We still have not seen a high volume wide range down bar, heavy supply, but I will take what we have so far. The slight rally Thursday and Friday can be called either a backup to the ice or a LPSY, last point of supply. From my point of view the important point is the lower high, meaning the daily trend is now probably down. This will be confirmed by breaking Wednesday's low.

The hourly chart and the point and figures I posted because they so nicely confirm the daily chart.

Also I posted a pnf chart of J.P.Morgan Chase. As the financial crisis has been declared over I thought readers might like to see an hourly pnf chart of one of the risk averse heroes--- JPM, also the subject of a recent paean by Gillian Tett. As you can see this chart is already in a confirmed downtrend with lower lows and lower highs. Moreover distribution stretches all the way back potentially to 4/3, if prices should fall much further. The news and the chart are at variance, you decide which to believe.

Markets 6/17/09

Very quickly, the market on the daily spy found support, closing essentially unchanged in the middle with the same moderate volume. A rally back to support /resistance at 93 would be normal.

The real interest today lies with the intraday 5 minute chart. The market fell on heavier than usual volume after the opening and found support at 90.83 with a high volume reversal bar. The ensuing rally had nice volume but it certainly was not up to the standard of many rallies earlier in the upward move. The rally made a higher high exceeding yesterday's rally peak.(92.29 vs 92.33) This puts us on guard for a change in trend. The decline which lasted until 91.41 was on pathetic volume except for one large bar down. The market found support on good volume at 91.41, making a higher low. We are now ready for a gap up opening tomorrow. This is normal and expectable. The only question should this happen is whether significant demand kicks in.

Markets 6/16/09

Today the index decisively made a lower low, closing at the lows on average volume. Once again the downward move had little resistance from buyers. The count on the hourly chart which has been uncannily accurate brings us to a minimum target of about 890 on the spx.

I want to go over the intraday in detail. We have discussed the lack of demand in the last two posts and I want to show what it looks like in the small particulars.

Until 10:10 the market is in a trading range with moderate volume. At 10:15 it pierces the bottom of that trading range and with the lower low sets up a possible downward trend. Unfortunately there is no subsequent lower high, it is an equal high. The volume however drops to nothing on this rally telling us there is no demand. The equal high will have to do. Most things are not perfect. At 11:00 price and volume move up. At 11:05 they retreat making the relevant higher low. A higher high is made at 93.29. Declining beneath the previous low at 11:20 confirms the possible downward trend combined with 10:15 lower low. Prices move down easily yielding further evidence of a downward move beginning. After traders see the poor rally attempt(no demand) at 11:35, they sell prices down easily, still no demand. Minimal support appears at 2:05 and at 2:30. No real demand appears in the next 75 minutes of rally. Selling in the last 15 minutes undoes the previous 75 minutes of rally telling us the direction of least resistance is down.

Markets 6/15/09

Once again I will be brief. Today the Spy gapped down and closed near but somewhat off the lows on average volume. We did not get heavy supply and the confirmation of trend I hoped for. Further the market closed within its range of the past two weeks and in a spring position.

All of this sounds pretty bullish, but there are two serious problems with the bullish scenario. First, gaps directly after an upthrust are usually pretty bearish. Second, today is the largest true range so far this month as can easily be seen by eyeballing Friday's high to today's low. As anyone who has been lucky enough to study with David Weis will remember a sharp increase in range can confirm the move. This puts the average volume in a new light. We fell easily with little effort meaning that the direction of least resistance is down. Remembering yesterday's post and the absence of demand I interpreted, today's ease of movement confirms those deductions. No Demand implies little resistance to downward pressure.

Briefly the market fell rapidly this morning on heavy volume. After hours of light selling and even lighter demand buying emerged at 2:55 and the market proceeded to recover 0.6 points. This relatively small demand was met with supply. Notice how many closes in the last hour were virtually equal meaning all the buying had little effect. That being said having surpassed the high of 11:45 we are in the position for a potential small uptrend and that in a spring position. In the absence of heavy supply we need continued light demand to maintain this down trend. Any rally to a lower high confirms the downtrend further.

As I do no have much time tonight because of household duties, I will comment briefly on two charts. The weekly spx just finished its smallest two week range in around two years. Despite making new highs this week the range remained narrow and the volume shrunk further. No matter how you cut it demand is shrinking at the top of a large rally. While demand can always kick in if it feels like it, I cannot overestimate the prognostic importance of no demand in predicting large moves.
The Nasdaq has been the upside leader. It has far surpassed its January high and in fact never made a new low in March. Eyeballing the chart I do not believe it made a lower low before this week except for what turned into a reaction in May. The low Friday was lower than the low Wednesday, marking a change in behavior but more importantly a lower low. Should we fail to rally from here or make a lower high, then we should expect a sharp downward move and the beginning of a downward trend.

Markets 6/11/09

The spx and the spy made a new high today and both then fell back into the trading range to close higher. The futures did not make a new high and in a brief moment for ego, since I primarily pay attention to the futures, my claim that the high was in is still valid and we are still awaiting supply. We can now leave ego and as fallible human beings approach these treacherous markets. The SPY today made a new high on moderate volume, a narrower range and a close at the low. Tomorrow quite likely will be a do or die day for the bulls. Any follow through lower tomorrow will put the point and figure of the SPX on the hinge at 940 with a count of 60 points from the 940 bar. 60 points brings us into the old trading range and potentially very high counts. Again we are awaiting supply.

I want to turn to the upthrust today and how I believe Mr Wyckoff would handle such a thing. At 12:55 and 1:00 we had had very high volume on the move into new high ground. The close in the middle at 1:00 followed by two heavy volume down bars with closes at the lows puts us on our guard. Something is not right. There seems to be too much supply retarding the rapid advance I would expect. The average rallies up on less volume in what I believe to be shortening of the thrust and now I am downright suspicious, but I want evidence of a change in trend. In the three bars following 96.11 the market rapidly and easily gives back its gain. There is ease of movement going down, very important. The next bar has low volume and a close at the bottom--a failure to rally and evidence that demand might be exhausted, at least temporarily. At 1:55 more evidence for lack of demand. At 2:05 we made a lower low, edging below the low at 1:05. The reversal bar at 95.88 signals a lower high, setting up the beginning of a downward trend. The trend has changed and that would very much interest Mr. Wyckoff. Ignoring misprints, lower lows and lower highs are the rule for the remainder of the day. The market closed having begun a downward trend. It is now up to the bulls to turn the trend around and the bears to win must enlist supply.

A count of 7 across the 900 gives a range of 950-970 which the index accomplished. The index is on a hinge with a count of 4 at the 940 line which brings us back into the previous trading range where the count can begin adding up quickly for a substantial decline.


Today the index with a small range and narrow volume tested the upthrust to 951.69. This is ominous and helps to confirm what I wrote in my last post. One of the great bear market rallies in history has ended. Clearly demand is exhausted, we are only awaiting supply.

The hourly chart of the SPY records its highest volume in 5 weeks the last bar on Monday. This volume was climactic and today we upthrusted that high. We must place today's upthrust at a lower level in the context of the reversal bar which peaked at 95.67. Having made a clearly lower high the direction of least resistance is down. We are only awaiting supply.

It took 3 1/2 hours to rally the 10 points from low to high today on the 5 minute intraday. This rally was weak and ended with a nice outside key reversal bar. There was no real demand at the close either. Note how light the volume was, far less than half the usual. We are only awaiting supply.

Friday was a reversal day in an upthrust position, with low volume and a close in the lower half. Demand is exhausted in the cash spx. The next step for a downtrend to be confirmed is for the index to move below Wednesday's low-- a lower low.
Friday's pnf of the spy clearly shows three large selling waves which are supply overpowering demand. In addition at this level having gone below the last low before the opening run-up we are in a downtrend.
Unlike the spx the spy had relatively large volume Friday. Given the close this is not necessarily more bullish than low volume. The battle is being fought in the derivatives because large players are not buying stock for the long term.
Please note that the 2 mid day bars taken together have the least volume of any 2 similar bars for at least a month. This is a failure of demand on a test of the morning upthrust.
Please note the large supply was on the morning sell-offs and the total absence of demand on the rallies at 1:00 and 1:50.

I HOPE YOU CAN SEE WHY I BELIEVE THAT ONE OF THE GREAT BEAR MARKET RALLIES IN HISTORY MIGHT HAVE ENDED FRIDAY.

Markets 6/4/09

All we really need look at tonight is the daily e mini chart that I have posted and once again I am short on time. The index broke into new high ground Monday on moderate volume, which constitutes a warning signal. Tuesday the range contracted as the market made a new high and the close was in the lower half of the range. Again bearish. Wednesday the market successfully backed up to the creek and the market held on low volume. Today the market rose closing at the top on the lowest non holiday related volume since the beginning of the year. demand wanes and today is a classic test of an upthrust. And we must wait to determine the outcome. Please peruse the other charts on your own. I believe they all support what I have said about the daily futures.