Seeking Alpha

David Fry's  Instablog

David Fry
Send Message
David Fry writes a subscription newsletter focused on technical analysis of exchange-traded funds, called ETF Digest ( Dave founded the ETF Digest in 2001 and was among the very first to see the need for a publication that provided individual investors with information and... More
My company:
ETF Digest
My blog:
Dave's Daily
My book:
The Best ETFs: U.S. Equities (A Companion Guide To Building Your ETF Portfolio)
  • S&P 500 Forming a Balance Area 0 comments
    Jan 10, 2012 11:15 AM | about stocks: SPY, IVV

    Scott Pluschau is a Contributing Editor to the ETF Digest.

    The S&P 500 Exchange Traded Fund (NYSEARCA:SPY) is forming a “Balance Area” for the past three days between a range of 127.29 and 128.23. I have marked this with a blue rectangle on the 30 minute chart below. A balance area is a term used in Auction Market Theory and what it shows is two sided price action. The purpose of an auction is to bring together buyers and sellers. This balance area signifies that market participants have found value here.

    As price has hit the top or horizontal resistance level, it was seen as an unfair high since it attracted supply and not an increase in demand. The last three 30 minute candles are a great example as each formed a topping tail showing upside price rejection.

    Important to note is there is a gap that formed to begin 2012. A gap forms when a market opens above its prior closing price and does not trade back to that level. Gaps tend to fill, and there are short traders out there that are betting on it. However the longer it takes to fill the gap, the more tension that builds for those on the short side. Should we make a new high without first filling the gap, this can lead to explosive moves as the short side covers their losing trades. When you are short, and want to close out your position you have to buy. This is an increase in demand. Others that were on the sidelines waiting for the breakout then become interested in buying as well, further increasing demand. This is the beginning stages of vertical development, or one sided price action.

    Stocks: SPY, IVV
Back To David Fry's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.