Sunday 27 March 2011
The never-ending rally has found yet another new life. Just when
it seemed buyers were spent, they managed to pull another rally
out of the hat. From near ready "Stick A Fork In It," to "It ain't over
'til it's over."
There is something for everyone is the stock market, and right
now, it is anyone's guess as to where it will go. The charts show
why. While it may look like a rectangle, on the 30m chart, the
horizontal lines are drawn from a single 30 minute range on Friday.
Anytime you see a wide range bar[s], it usually denotes a trading
range within those bounds will follow. The narrow trading range
from Friday did not exceed the upper resistance or lower support.
Flip a coin as to the next direction.
In 1966, there was a movie, "The Russians Are Coming, The
Russians Are Coming," a comedy. The national symbol for Russia
was a bear. This market could similarly be labeled, "The Bears Are
Coming, The Bears Are Coming," also a comedy. We know of many
reasonably sharp traders who have been calling for a bear market
for two years, to no avail. While we understood the sentiment, the
TREND kept saying, "not true."
It is an observable fact that the strongest volume accompanies the
largest declines since late February, and it is also an observable
fact that the market shrugs it off and rallies, at least for now. Friday
was a smaller range bar, and the close was about mid-range.
Normally, and we hesitate to even use the adverb in a sentence,
this means buyers and sellers were in balance. However, the
market was in a rally mode, and the smaller range tells us that
sellers squeaked out a victory for the day by keeping the range
from extending higher. From this, we would expect a sell-off, even
a short-lived one.
The next higher time frame, a weekly chart, shows price about in
the middle from the high to the last low, a week ago. A market in
the middle does not reveal very much, and that comes as no
surprise. Why we show it is to allow for yet one more high, and for
lack of any other reason, we chose the last failed rally before a
large breakdown, back in mid-2008 at the 1371 area. We drew in
a converging wedge, just for show.
Even the higher monthly time frame does not reveal much. The
previous two months, January and February, were smaller ranges,
not showing strength. March is a much wider range bar, but so
far, it has not made any net upside progress. Of course, that can
change in the next four trading days, just before the end of March,
and also the end of the first Quarterly chart for 2011.
If you saw anything significant, please let us know.