Monday Evening 28 November 2011
We have not written on our once favorite market in some time, so
this will be a catch-up review. As always, when analyzing a market,
it is best to start with a higher time, for context, then work lower.
The monthly is first.
There was climatic volume for the month of August, and the close
was just above mid-range the bar, giving a slight edge to the buyers.
Whenever that combination exists, it can often delineate a trading
range bound by the high and low of that bar, and that is what has
developed, since August. The rally in October, second bar from the
end, was a wide-range bar up, but there has been no further upside
for the current month, soon to close. November's range has been
small, so we cannot glean too much from it, at this point, for it is an
inside bar with a likely lower close.
Expect more sideways activity contained within the August range.
Does the weekly concur?
So far, we would have to say yes. The last important rally high,
prior to the 2008 collapse, was 1441, followed by a weak retest
rally to 1306 that led to the precipitous drop. They form a band
of resistance, marked by the two heavy horizontal lines. A half-
way retracement of that range is 1373, which is where price
stopped in the first week of May, 2011. The fact that price could
not exceed that level tells us that sellers were in control, at that time.
From the ensuing break and most recent rally, it is apparent that
the 1300 level remains important, although it is not in jeopardy of
being retested, for now. 1306, a touch higher, is the wide-range
high from the monthly chart, adding to the validity of that resistance
The daily is no surprise to be in a broad trading range, and right
now, price is just about smack in the middle of the several month
activity area, making direction a coin-toss for odds. No edge there.
A few more observations can be made from this time frame. 1208
was a November low, and the 1209 bar, [following the circled closes]
was the last high prior to the late November drop, last week. We drew
a horizontal line to show how that can be potential resistance for the
A 50% retracement of the most recent high to low range is 1214.
We circled the two day cluster of closes, just before price broke
tentative support at 1208/1209, and those closes were at 1214,
the half-way mark just mentioned. Whenever a price area bunches
up, it tends to offer greater support for declines or greater resistance
for rallies, and the S&P is currently rallying.
What may be key for this market is IF price can extend the present
rally into the potential zone of resistance, how far into that zone,
should the market continue up, and then, note HOW price
responds to it. If price cannot reach that high, or acts poorly and
immediately sells off, we will know to expect lower prices, perhaps
retesting the lower portion of the August range.
Until that happens, there is no particular edge, either way, at this
point in time. Let the market declare its intent, then look for an edge
to trade accordingly.