Markets 9/30/09

This market is on the hinge(notice the apex of sorts which th red o forms). Unfortunately it has not been able to rally enough so tha it is in danger of breaking below its9650 support.
This is a very interesting chart. At a we have an upthrust followed by a rapid sell off with wide bars, closes at the bottom and heavy volume. This is heavy supply. The market makes a low at 104.62 and enters a tight trading range. Breaking out makes a higher high and b with its low volume and 2 small bars with the same close one might call a test of the breakout. The selling has dried up. From b to c notice how many of the strong up bars close on the high of the bar. None until the very wide range bar leading to c. This kind of vertical move at c often precedes a buying climax which we get at d. I believe that the bars from b to c did not close at the high because there was very heavy selling into the advance. Further I believe a lot of demand was used up supporting the market and fighting the selling into the advance until c. The reversal a d says demand is temporarily exhausted. Notice the lack of volume for the next almost 2 hours. F is an upthrust and following bar with even less demand slumps back into the trading range. This begins another big sell off. The rally beginning at h ends right where is should if this market is bearish on a reversal bar.

There are two ways to argue today's action. The heavy selling could not make a dent in the demand and despite the heavy selling prices did not decline substantially. We are going up. Or the demand is getting exhausted and will soon give out as this selling has been going on for two weeks and shows no sign of abating.
Heavy volume inside a trading range can mean large traders are exiting.

Markets 9/29/09

After a near vertical rise to the highs, prices are on the hinge.
Prices made a lower low and lower high today. The trend tentatively is lower, but a lower low is required.
Tonight a different average will give a remarkably different volume picture while all the averages show a narrow range reversal day. I chose the SPY because it clearly shows the strength of the sell-off and weakness of the subsequent rally. I believe yesterday's volume was as poor as depicted and do not excuse it with the Jewish holiday. Bears wanted higher prices to sell more and bulls wanted higher prices without having to buy much as has been the case throughout this move in the SPY. As such I have to believe until shown other wise today is a classic secondary test of the highs and offered a low risk place to sell short. Needless to say especially in this market where the bulls are financed by the FED there are no guarantees.
The high volume at 9:55 was climactic in an upthrust position and the sell off to 2 was a sign of weakness. The volume on that bar was fantastic and was sellers liquidating very large positions. Having run out of buyers on the way up they sold them to those waiting for a dip on the way down. Someone is in a rush perhaps it is the end of the quarter perhaps they know something. 3 is the test of the sell off and the lower low. It also is a reversal day. Frequently these tests of highs or lows or breakouts and breakdowns end with classic reversal type bars. In fact you can count on it in the majority of cases. Every selling bar or drive the rest of the day and I numbered some of them has ease of movement and wider bars and more volume. In contrast the bars in rallies are wanting range and volume. The rally from 5 until 6 had no volume.

Markets 9/27/09

The market after a weak rally had an upthrust at 105.36. Note the low volume on the next bar making it an attempted rally that failed which is confirmed by the following bar with ease of movement down. Once the decline begins, the closes on all rallies until the low are contained in the range of the large down bar that precedes the rally. This shows the dominance of supply and the weakness of demand. There is no significant demand in the rally that ends with a small range and low volume at 104.93. The subsequent decline is able to make a lower low and as such we end the day in a potential down trend.


This chart clearly depicts the ambiguity of Friday, a lower high, low, and close(also at the low end) with a narrow range and the second lowest volume of the month. Either there is no demand or supply is exhausted with shortening of the downward thrust. The intraday analysis above suggests an answer but it is not definite.
If the trend has changed then one must pick a vehicle. So for example, DRV did not make a new low with most of the other ETF's shown and with the indexes. Mr. Wyckoff would have been attracted to that sign of strength and in fact DRV has had the largest percentage move so far. Note all of these ETF's finished the day looking much stronger than the SPY looked weak.

I have also shown charts of the dollar and the bonds as we have discussed before their relation to the equities. A breakout looks imminent in the bonds and the charts show heavy buying in the dollar for a turn. Both needless to say are bearish stocks over the medium term.

Markets 9/24/09

Please read this comment last. Having observed the selling greater than the buying for the better part of the previous week, I expected an upthrust after the Fed meeting and for it to be the terminal event preceding a decline. The market had to give its confirmation and to confirm that the upthrust exhausted the little demand left. The second buying climax is frequently an easier and safer sell than the first. The second buying climax is a reversal bar. Find the two bars that tell you demand is exhausted, Note the confirming ease of movement at 2:55 which also makes a lower low. For the next few hours the liquidation carried on with high volume and a large number of low end closes. From 10:40 until the close, the market traded in a narrow range barely able to rally 10 ponts or 25% of its downward move. The inability to rally shows no demand so far.
Please notice the upthrust yesterday and the rapid decline following. An upthrust can be seen as one of those resurrection bars but it is terminal for the upmove.
The high volume down bars show experienced large traders, realizing the market has turned filling the dip buyers with shares. They are in a rush and not saying "after you." If the marker does not retrace more of its decline, that would be a tremendous sign of weakness.

Markets 9/22/09

So the problem : Is today's line across 107.24 absorption or distribution. For an answer we will look at the intraday later.
Let's weight the pro's and cons. There are only two negatives on this chart. The first is the climaxing action into 107.55 and the second is the low volume on today's rally. These are more than counteracted by the smallness of the reaction into the 21st and the fall in volume on that reaction.
Unfortunately because of the way this charting service does its hourly charts you cannot see that the fifth hour of trading had higher volume than the third and fourth hours. This is quite unusual and indicates heavy supply as the bar also happens to be a reversal bar.

I want to explain on the two previous charts the points I labelled R. R stand stands for resurrection because these bars are where the bear case was resurrected(just noticed I skipped at least one, can you find it?). On all of these bars the market was rallying strongly and then turned around and moved sharply lower, closing on the low with a wide range from high to low.

The market found support and the selling abated at the bars labelled S. After S the market rallied but the bars on the rallies had less range, so it took more time to recover from the damage than to inflict it. The selling is stronger and more intense than the buying. This is a change of behavior and that it is occurring on the day of the FOMC meeting certainly is suggestive.

It is not often that one gets an opportunity to acknowledge one's teachers. David Weis taught

me about comparing hourly volumes and resurrection bars. Gary Fullett taught me the importance of the bar's range. Both are giants of Wyckoff analysis and I wish I could but get a better perch on their shoulders.

Markets 9/20/09

I wanted to point out that the dollar index is very close to an old support point from October of last year.
Because the SPY declared and paid a dividend on Friday, we will use DIA. You can clearly see the near vertical move on the 17th and the sell off that followed it. Today we tested that top twice and failed.
I showed above how the dollar is at a long term support. Here I want to show the massive buying that came into the market, more than doubling the average volume of the past week. This becomes very significant when we remember that the S&P has close to a 100% negative correlation with the dollar.
In the 15 minute after hours on Friday, the S&P fell to the low of the day on heavy liquidation. This sets up the possibility that Friday was an attempt to rally that failed due to exhausted or lacking demand. Supporting this possibility is the sharp drop in volume and the double top on the intraday point and figure. Even if that were not the case, the three days of virtually unchanged closes point to supply at least checking and perhaps overcoming demand, and that is bearish enough given the action of the dollar.

f
I want to begin with an observation. Today the market turned twice after the opening. The first time was on a Spring at noon and the second time was the upthrust to 98.46. I do not remember springs and upthrusts working this well in a while and it indicates to me that possibly the controlling forces in this market have either changed their intent or a new control is emerging. It is not behaving the same way. The high at 98.46 was an upthrust of the previous high that ended and incredibly weak rally. Contrast that with the sell-off that began at 3:25 and closed in the after hours in approximately the red circle. All the closes were at or near the low, ranges were wide and the volume was decent. If Friday were not options expiration we would conclude that after the rally attempt failed supply kicked in to the close and perhaps the trend is changing or beginning to change as supply has clearly been stronger than demand for a few days now.

Markets 9/17/09

It might be helpful to read the daily and pnf charts before looking at the intraday.

I posted this chart to show how well the market has stayed within its channel and what a blow-off top looks like. Notice the sharp acceleration of the move after 105.5 and the pickup in volume. Notice the turn and the ease of movement down. Notice how many hours of upward effort are retraced in just 1 hour of down move after a buying climax. All the buying is exhausted in the frenzied move up and churning at the top.
Notice the sharp acceleration of prices up to 1. Experienced traders with large positions sell, often on a scale up, into this kind of move as it gives them the chance to sell without depressing the price. Demand is either exhausted at the top of 2 or supply overcomes demand. Either way experienced traders see the turn and sell on the way down. The buyers are people waiting for the dip, and their demand is filled by the selling of experienced traders. The selling of experienced traders causes the volume to swell to 7 million shares here and 90,000 in the futures which is even higher comparatively. 2 is called a key reversal day because it goes above the previous bar and closes below it. Note how markedly diminished the volume or demand is on 3's attempt to move up again. This tells us the demand of the buyers has already been filled up. If our deductions are correct, we should get a sharp down move with ease of movement and high volume as more experienced traders push their shares onto the market. This happens to 4. Note at 4 there is not enough supply to make a lower low ( beneath the low of 9:45) and we can guess that this recovery rally might go a long way back toward the top. The only reason I stuck with my position on this rally was the very high futures volume on the key reversal bar. It was just to classic. At 10:50 a trading range begins and at 5 it is upthrusted. The immediate return to the trading range tells us the demand above the range is exhausted. We move sharply down to 6 with eom. At 6 the closes of the next 3 bars are within its range, telling us not enough demand to mount any kind of rally. The same thing happens at 7 where all the closes are within the range of the 12:15 bar. Again we break down with little resistance and with ease of movement. At 8 we spring another tight trading range and this time make a higher high, moving through the turquoise line and test at 10, making a higher low. We have now ended the first little trend marked A and begun the second trend. We weakly rally to the next trading range and upthrust at 11. Same drill, with ease of movement to 12. The lower low means we have potentially begun another small down trend. Should that down trend successfully break the low at A we might very well have begun a downtrend of a higher magnitude.
The only thing I wanted to show on this chart is that the move up to 1070 is a blow off that provides the broad market demand that enables large position holders to not only take profits but to get short.
Wrong day!
Bonds are hugging the top half of their trading range and an upside breakout can be anticipated.
Compare how much effort it took to push the dollar down in April and May versus in September. There is enormous resistance to a downward move. This is one of the reasons that I am in the 4 or 5% that are dollar bullish.
I like the volume figures for the New York Composite (NYA). You can clearly see the blow-off move coming into this week and the very high volume this week. This high volume according to Wyckoff Associates signifies a change in ownership from strong hand to weak hands, the type who are attracted to all the bullish hoopla. Today was a clear buying climax and reversal day. It may only be the first of many but a very good argument can be made that these buying bulges have been going on since early May. That is a lot of distribution.

Markets 9/15/09

Error
Possible upthrust and possible change in trend.

error
On the 2nd highest volume in 3-4 weeks we made a new high with a narrow range and a high end close. This is quite bullish. Unfortunately we are also at the upper trend line.
The hourly chart clearly shows with the reversal bar at 104.76 how strong the support is under the market. The next three bars all have closes at the top and prices do not move 0.5 points. Just as the buying overcame the selling in the morrning, so the selling overcame the buying at the final hour. For all the pushing and hauling prices moved less than 1/2 point for the day.
One method I am told of turning or positioning for a turn in the market is to sell on a scale up until the buying is exhausted and then sell much more when the market has turned. The outside key reversal at C marks both where demand was exhausted and the selling beginning in earnest. A,B,C are also where large numbers of shares were sold into the advance. Obviously this is not a strategy that is pursued by small traders, but by major funds with sophisticated traders and huge quantities of capital. By D the selling was a torrent, possibly even climactic.

You can imagine my surprise when I saw the up down pumping action at D and E and knew that it meant demand was overcoming supply. The rally through the green lines created a possible uptrend and the test is marked on the chart. Note the evaporation of volume and shrinkage of range on the test. Instead of a rout we now have the makings of a good up move and that expectation is disproved as well. By 3:30 major selling begins, breaking the green line for a lower low and we end in an OKR bar.

Markets 9/14/09

Since moving above the blue reverse trendline, the euro has had that up-down pumping action I consider to be the equivalent of Wyckoff's buying or selling climax. A move below 145 constitutes a lower low and thus a potential change of trend.
The oil chart is not a great argument for inflation.

Our usual SPY chart was not usable because of print errors so we will use its 2nd cousin the DIA. First notice the increase in volatility over the past few days. Second, please notice that the largesst uninterupted wave on this chart occured today, in the morning break of 1 point. Obviously this is the largest reaction of the chart and as such a warning of possible trend change. As the Dow has tended to lead the S&P, not making a new high is significant.

ERROR CHART WILL NOT GO AWAY.
Today began with that up-down pumping action but it was angled sightly upwards. It is especially noticeable in the first 30 minutes. So just as there was heavy selling in the first 30 minutes that was overcome by demand, that selling followed the rally higher over the course of the day. The 1's across the chart label heavy buying bars that are almost immediately reversed. Either the selling, the resistance to the move, or the buying will win out. Tomorrow promises a big economic report, the retail report and no doubt much of this selling was in anticipation of that. Regardless the day day ended with the up-down pumping action and the last bar of the day was an outside key reversal bar. The volume from about 2:30 on was very high and net,net prices did not move 5 points.
Well itis no wonder the pnf shows today as the largest reaction, the daily shows it as the only reaction. It is hard not to see today as a bullish test, falling and then recovering the loss and then some to make not only a test but also a reversal day. The low volume supports the idea that nothing is for sale beneath this market. Today demands strong high volume follow through on the upside, otherwise this low volume becomes part of a rally that failed to enlist enough support to continue.