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Michael Noonan Edge Trader Plus Michael Noonan is the driving force behind Edge Trader Plus. He has been in the futures business for 30 years, functioning primarily in an individual capacity. He was the research analyst for the largest investment banker in the South, at one time, and he... More
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  • S & P - Weekly Chart At Odds With Daily? Or Just Our Analysis? 0 comments
    Apr 19, 2011 11:54 PM

    Tuesday Evening  19 April 2011

     A case was made for an increase in bearish potential, yesterday,
    [See S & P - Battered Bears Rearing Up, click on http://bit.ly/i4qGE8],
    and we projected a downside of 1240 - 1260 area +/-.  Volume has
    increased on the down bars for the first time since the March lows. 
    However, this would not be the first time that price has ignored
    normal technical signs and continued in the direction opposite to
    signs of weakness, thank you Federal Reserve and POMO.

     One of the best things about having trading rules is to ensure
    the market abides to them when analyzing a market for a position. 
    We were looking for a weak rally to sell, and one may develop on
    Wednesday, or one may not.  The 1310 are was considered
    resistance and a potential area to establish a short position, but
    only if the developing market activity indicated weakness.  So far,
    with the exception of less volume on Tuesday's rally, price has
    not weakened.  In fact, it closed at the upper end of the range,
    telling us that buyers were in control of the day.

     You can see that overnight price activity has broken the supply
    line in the down channel drawn on the chart.  While it is a degree
    of buyer's ability to show some relative strength, the more
    important area of resistance comes in at the 1320 area +/-.  It is
    from there that price sold off on 10 April, and again when there
    was the sharp sell-off on Monday.  The ease of downward
    movement from 1320 that day should be defended by sellers,
    and that is why that level may be a more formidable area of
    resistance.

     With this knowledge, guesswork has been eliminated.  All we
    need do is wait and observe HOW price responds/reacts to that
    potential resistance, if at all.  Once we see the character of
    response, it will become more apparent on what to do, if anything.   
    Just because an area may be identified as resistance does not
    mean sell orders should be placed there ahead of time.  Even
    though it is presented as potential resistance, the market may
    ignore it, and the potential will not be realized.

     We have said it before:  Let the market lead and follow a step
    behind.  It can be costly to be even just half a step ahead.  It was
    an observed condition of the weekly chart, today, that has
    tempered the enthusiasm, once again, for the short side of the
    market.  If weakness becomes apparent, a short position will be
    initiated, but not until.
     

     S&P D 19 Apr 11

     There is a concept in technical analysis that indicates the strength
    of a bull market, and it is called "spacing."  Spacing exists when the
    low of a swing is higher than the previous swing high.  The previous
    swing high was in April 2010, and from it, we drew a horizontal line
    to the right.  The last swing low was a few weeks ago, in March, and
    from it is drawn another horizontal line.  There is a space between
    the two.  What it says is that the March correction showed a sign of
    strength as buyers were strong enough to support price, on a strong
    sell-off, we might add, without reaching the previous swing high. This
    is an indication of a relatively strong market.

    Duly noted.

     

    S&P W 19 Apr 11

    Themes: SnP, SPY, QQQQ, Dow
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