For whatever reasons, the NYA seems like it has the best price/volume indications. So lets briefly review. September 15,16,17 the market made a high volume top and then fell to October 2 on volume that exceeded on average the preceding rally. This is a bearish indication meaning that supply exceeded demand and that we filled up buyers on the way down. However if we compare the decline to the 10 days of rally preceding it, we had a larger rally on the decline than any reactions on the advance. We saw buyers eager to snap up shares on the dip. They were not so eager to bid for shares on the rally beginning 10/5 as the volume on another straight up rally did not come close to the volume on the decline. In fact it did not come close to the volume on the September rally. Taken together these indicate that demand is drying up and that the market rose on the lack of selling rather than new substantial buying. This constitutes weakness preceding an upthrust.On Wednesday the market rose to a new high on the widest range and the heaviest volume of the rally so far. Thursday it failed to maintain its upward momentum. The narrow range and volume that was the same as Wednesday's means that the buyers who love new highs and rush in as well as sorrowful shorts covering were being filled up by sellers. This makes the potential upthrust or change in trend if the last buyers can be exhausted. Large sellers see this large transient demand as an opportunity to unload large blocks of shares. In fact as there was no selling on the way up, we could almost say they were waiting for this opportunity. On Friday the sellers filled buyers on the way down, again on heavy volume closing the market for the first time in days in the lower half of its range and in fact beneath Thursday's low price. If the old highs around 7090 can hold we will rally from here. If not we must examine the demand of the dip buyers and whether it can rapidly absorb the selling. Either way as David Weis once said this is a low risk opportunity, so take a chance. And of course this might actually be the rally top and the beginning of a larger down move.
Gapping down in an upthrust position is bearish. Here we also broke the trendline and then retested it. As of Friday the line of least resistance is down and we need further ease of movement on a decline to confirm it.
I believe I labelled many of the relevant points on the chart. S>D means supply overwhelming demand. SOT= shortening of the thrust. The rally of 0.6 points from the last test to the first upthrust(UT) has nice volume but it goes nowhere. The result is not proportional to the effort because there is too much selling into the rally which we cannot necessarily see but we can deduce. Notice the ease of movement on the sell off from UT and the resistance to the upward move at 2:25 and 3:15. Again there is heavy selling and ease of movement from the the last upthrust (UT2). These two upthrusts I believe constitute stopping action making Friday's action a lower top and a rally that failed. Given the stopping action I put more weight on making the minor lower low in the day's penultimate bar. This plus all the ease of movement gives further evidence that unless something changes tomorrow the down trend will be resumed.
Everything, almost, that we discussed above can be found in the point and figure chart.
Gapping down in an upthrust position is bearish. Here we also broke the trendline and then retested it. As of Friday the line of least resistance is down and we need further ease of movement on a decline to confirm it.
I believe I labelled many of the relevant points on the chart. S>D means supply overwhelming demand. SOT= shortening of the thrust. The rally of 0.6 points from the last test to the first upthrust(UT) has nice volume but it goes nowhere. The result is not proportional to the effort because there is too much selling into the rally which we cannot necessarily see but we can deduce. Notice the ease of movement on the sell off from UT and the resistance to the upward move at 2:25 and 3:15. Again there is heavy selling and ease of movement from the the last upthrust (UT2). These two upthrusts I believe constitute stopping action making Friday's action a lower top and a rally that failed. Given the stopping action I put more weight on making the minor lower low in the day's penultimate bar. This plus all the ease of movement gives further evidence that unless something changes tomorrow the down trend will be resumed.
Everything, almost, that we discussed above can be found in the point and figure chart.It behooves readers at a point like this to look at the charts of various individual leaders, like GS, AAPL, X, JPM, GOOG as well as charts showing the Fed influence which we discussed. At some point we will study the charts under the Chinese influence which include many commodities and the US dollar, with all of its influence on the stock market.
