edgetraderplus'  Instablog

Thursday Evening  12 November 2009

The market continues to show growing weakness, enough to get short at
1091.50 during the day.  Half the short position was covered at 1087.50
on the close, and the balance is being held going into Friday's trade.  The
reasons are fairly obvious.  Tuesday's small range was a red flag, a note
of caution because buyers were so spent they could not extend the range
higher, and at an important point of resistance.

Wednesday turned out to be a failed probe to the upside.  We expressed
our view that a new high was likely, S & P - A Tired, Spent Bull?, from
yesterday.  That did occur, but instead of continuing on strength to the
upside, the range was still relatively small, and the close was back under
the previous highs from October.  Not a good sign. 

Right from the start, on Thursday, price opened lower and traded in a
small range.  Once that range was broken to the downside on strong
volume and a poor close, we recommended short positions at 1091.5 area. 
Half the position was covered near the close for a few reasons.

The late day rally on the close, off the lows, broke a 10 minute intra day
channel line from the day's highs. The biggest concern remains the lack
of new supply coming into the market.  Supply is strong selling, on
increased volume activity that breaks previous support areas.

You can see volume increased slightly over yesterday, but it does not
reflect a sharp increase that would demonstrate that supply was present. 
Yes, there was some selling, but buyers were not very strong and fewer in
number, so what selling there was, prevailed.

What we know is that the trend is weak.  The daily trend is sideways, as we
have identified previously.  The weekly trend remains up, but depending
on where price closes on Friday, that trend has weakened, as well.

We are going with the prevailing price direction, prompted by the intra day
trend, which is down, so we are in harmony with the trend in the time frame
identified.  Because the higher day time frame is only sideways, there is not
a lot of conviction in expectations for a concerted downside effort, at least at
this point in the market structure.

Cautiously short.