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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 - What Is In A Name? An Outside Key Reversal Is Still the Same. 0 comments
    Apr 24, 2011 3:09 PM

    Sunday  24 April 2011

     We have two charts.  The daily shows a question mark on the
    viability of breaking through the current resistance of 1337.74. 
    The weekly says, so what else is new and argues for continuation. 
    Starting with the former:

     The last time price saw 1337.50, back in February, it led to the
    largest sell-off in the recent upmove.  The smallness of the range
    at the high says there was a lack of demand, otherwise, the range
    would have| extended higher.  The lack of demand was confirmed
    by what followed, a one month decline. 

     Note how large the ranges were and how volume increased as
    price dropped.  Compare that to the character of the last rally to
    get price back to where it was a few months ago.  The daily ranges
    are smaller, and volume has declined.  Plus, the rally was a bit more
    labored in time:  18 days down, 25 days to recover.

     Thursday's close was a higher high, a higher low and a higher close,
    but the location of the close is at the bottom of the range.  A weak
    close tells us that sellers were in control because buyers could not
    keep the price higher.  In addition, this weak response occurred at
    an obvious resistance level that  everyone can see, even the
    technically challenged.  Normally, that would be a cause for concern,
    but this is the  Fed/POMO-driven S&P rally that has defied many
    negative technical signals.

     Why should this one be any different?  The one positive aspect is
    HOW the market got to resistance. From a point of weakness, on
    Monday, 4th bar from the end, price rallied strongly with high-end
    closes.  The daily chart alone suggests an "iffy" situation at known
    resistance.  Time to look at the next higher time frame to see what
    it says.


     S&P D 24 Apr 11

     Here we have a roll-over in contracts, so the February high, the
    March contract at the time, is a bit higher than the current high of
    the June contract.  What you see on the last weekly range is what
    is called an Outside Key Reversal, [OKR], and it is as its name
    connotes, a reversal, but of a specific variety.  The low is lower
    than the previous week's low, the high is higher than the previous
    week's high, and the close can vary as to bar location.  In the
    instant week, the close is near the high.

     An OKR is usually a sign of strength as the market reverses
    course, but the weekly trend has been up and nothing, trend-wise,
    is really being reversed.  Seeing that, we then looked backwards
    to see if we  could learn anything in order to look forward.  There
    were four other such OKR bars, all designated by  arrows on the
    chart, none of which really reversed an existing trend.  But the
    name still applies.

     In every instance, the OKR close was high-end.  Also in every
    instance, the market went higher for a minimum of two weeks, the
    January OKR, to longer periods as seen by the others.  If history
    is to repeat, one would have to say we are looking at a no-brainer
    market situation.

     Could it be so?

     S&P W 24 Apr 11

    Themes: SnP, SPY, QQQQ, Dow
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