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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 - Continuation Down, Or Buying Opportunity? Needs Confirmation 0 comments
    Jun 26, 2011 4:09 PM

    Sunday Afternoon  26 June 2011

      The stock market is in the process of retesting important support. 
    We have an array of charts to convey a harmony of what may be
    developing as a buy opportunity.  As always, we turn to best source
    of market information, and it comes from price and volume activity
    generated by the market itself.  We start with a monthly chart, which
    is not final until later in the seek but, the end of the month is close
    enough to at least be aware of this higher time frame, for it is more
    controlling than the weekly.

     Volume has increased the past two months, noted by the last two
    red bars at the end of the volume portion of the chart.  This is the
    first lower low since the high, last month, and it keeps this correction
    in a first degree, that is 1 to 4 months.  The support trendline off the
    recent lows has not been violated, and there is still spacing from the
    last swing high.  Spacing is a current low holding above the last swing
    high, and it is a sign of market strength.

     The monthly trend remains up.

     S&P M 26 Jun 11

     We see the same lines drawn on the weekly chart that are holding. 
    An extra horizontal line has been added to reflect the last swing low
    from March 2011.  What is interesting about this chart is the clustering
    of closes for the past three weeks.  This shows a stand-off between
    the forces of buyers and sellers at a point where sellers should have
    the edge. 

     Volume increased last week, but note that the increased selling effort
    did not take price below the previous week by very much, and the
    weekly close was almost unchanged.  Here again, sellers have been
    in control, evidenced by the lower end closes for each of the last four
    weeks.    While the selling effort increased, the second highest volume
    since April, there was zero downside progress made.  What this
    suggests is that buyers were meeting and matching the effort of sellers,creating a closing balance for the past three weeks.  

     A point to remember is that from balance, the markets move to
    imbalance.  We could see a directional move this week, up or down, or 
    price can remain in a controlled range and show another cluster close.
    This is the eighth lower trading week, putting the weekly chart in a
    second degree correction mode, but it has been holding above the
    important March low.

     We see the trendline holding, spacing from the last swing high, and
    price holding the last swing low, all signs of an upward trend, with a
    beginning sign of some weakness by a second degree correction. 
    This 8th week down has exceeded the 7 weeks it took to rally, so the
    time factor gives a small edge to buyers in that regard.

    S&P W 26 Jun 11 

     The daily chart shows the weakest of the three time frames, and 
    it also shows a sideways direction,  a change in trend from up to
    sideways.  We drew an oversold trendline, slanting down from the
    lows, beginning in May.  Most of the activity for June has put the
    S&P in a deeper oversold condition, but as with the monthly and
    weekly, the downside progress has been arrested as price moved
    sideways and just regained the oversold trendline.

     What is telling on this chart are the two highest volume days, both
    red bars indication price was lower in close than the previous day. 
    Both high volume bars were wider range to the downside, showing
    ease of movement lower, and the closes were low end, showing
    sellers winning the battle each day.  However, when the question is
    posed, what were the rewards for the seller's efforts on both days,
    one would have to say none, in the first instance, and a strong close
    in the second one.  The strong close, second bar from the end, tells
    us buyers were in control.  The close was lower than the previous
    day, but it is results that matter, and the buyers were much stronger
    at this recent low level.

     This is the critical area for sellers to reassert themselves and force
    price to continue lower, or this is where buyers are able to regain
    momentum and turn price around, creating a selling opportunity.  Both
    the monthly and weekly trends remain up, and the daily is successfully
    working off an oversold condition.

     The daily is showing greater buying results than selling results, but
    anything can happen, so confirmation is required.

     S&P D 26 Jun 11

     We now move to a 180 minute chart, three hours per bar, and right
    away, we see two failed downside probes on the 16th of June.  This
    creates potential support, and a horizontal line is drawn to show where
    price is likely to react positively, if the market direction is changing. 

     There is a successful overnight retest on the 19th, again on the 23rd,
    and price held on the 24th for the third time.   What the market is also
    showing are three consecutive higher lows, and that is a positive sign
    for buyers.  Adding strength to that conclusion are the widest range
    bars are all to the upside and against the down trend.  In a weak
    environment, buyers are showing up and controlling the down days.

     On the 23rd, the highest volume bar shows the strongest rally in
    terms of a range up.  When you see a wide range bar with sharply
    increased volume, the range will be defended.  On Friday, price sold
    off for four consecutive lows, but the last bar of the sell-off, second
    from the end, showed no more ability to continue lower,and it
    stopped at the low of the range from the up bar of the 23rd
    ,
    buyers defending that price level.  The comparative volume between
    Thursday and Friday shows a decrease, and that means selling
    pressure was drying up as price retested activity from the 23rd.

     S&P 180m 26 Jun 11

     Moving to an even smaller time frame, a 30 minute chart, we see
    another failed probe on volume lower than the volume that led
    directly to that low.  Later in the trading day, there was an sharp
    increased in volume activity, as price was rallying away from the
    lows.
        You can see the greater detail of how that high volume rally
    area is stopping Friday's decline, and there is another sharp
    increased volume rally late in the day as buyers stepped up and
    bought all the offerings of the sellers at a support level.

     All in all, if buyers can continue to hold the efforts of the sellers, as
    buyers have been demonstrating, then we are more likely looking at
    a turnaround down here, rather than a resting spell before the
    downside trend continues.

     What is needed now is confirmation in the form of wide range bars
    up with strong closes, on increased volume, or the opposite, where
    sellers take back the momentum lost to buyers.  There need not be
    any guessing as to the outcome, for we have a slew of clues that just need confirmation to take action on the buy side, or a negation of the
    positive to expect lower prices this week or next.

     There is the 4th of July holiday coming up, so anything can happen.
    Let the market make the final determination, and then react accordingly..

    S&P 30m 26 Jun 11

    Themes: SnP, SPY, QQQQ, Dow
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