Tuesday 19 Janaury 2010
As a follow-up to the last article on the S & P, the spread we brought to
everyone's attention last week,NAS -E-Mini Spread - A Clue For Market
Direction, [click on http://bit.ly/8JyYYC], continues to show that the breaks
seen, such as Friday's, tend to not have downside follow-through. Tuesday
morning's early activity, in the first hour of trade, bears this out with an 800
tic rally.
Last week, the spread was near the support channel line. Today, it
continues to move higher, along with the markets. What has been
problematic is the yo-yo movement of price...down 1200 tics within the first
hour's trade, and today's first hour trade has price rallying 1,000 tics. There
was little preparation to indicate uninterrupted, quick moves as they
occurred in 10 minute spurts, uncorrected.
The overall activity since November has made the market difficult in which
to be landed. When you look at the recent gains from monthly high to
monthly high, they are less than impressive for what has to be called a
bullish move up since March of last year. What makes it problematic from
a technical perspective is that the lack of market strength inevitably invites
sellers to step in and take over, but for a variety of reasons, that has not
been the case. No matter how weak the rallies, selling efforts have been
weaker, a market anomaly.
It makes the anemic up moves suspect, yet after brief sell-offs, they
resume higher in a grinding fashion. On the one hand, the grinding higher
has bullish implications because it indicates shorts are continually being
punished by having to cover and pay higher to get out. Of course, we are
talking about those shorts who ignore the market trend, and they should
expect to be punished as a natural consequence. On the other hand, the
weak demand moves up are always susceptible to selling activity, and we
just saw evidence of that this past Friday.
The reason why we present the spread chart again is because spreads
tend to lead, and as long as the spread points higher, this push-pull activity
will remain standard fare. The spread bears watching, at least on a weekly
basis, as a possible shot across the bow to the bending trend that continues
to confound and beat the bears.
