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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 - Rallying Or Levitating? No Supply Selling = Higher Prices 0 comments
    Mar 15, 2010 9:06 AM

    Monday  15 March 2010

     Last Thursday, the daily chart in our article showed the same resistance
    line drawn below, S & P - Negotiating A Resistance Area, [click on
    http://bit.ly/dcXJik].  That day's volume turned out to be the highest for the
    week, but the net progress higher was not all that great.  Friday closed
    about unchanged, [2nd bar from the right], again showing little upside
    progress.  The last bar shows Sunday night into Monday morning activity
    as this article is being written, pre-opening.

     We see price levitating more than rallying because the activity is not very
    strong.  The rally bars are not wider as price rallies, and volume has not
    expanded along with the rally.  What is missing is supply selling.  As a
    reminder, supply selling is different from daily selling activity.  Every day
    there is some form of selling activity, as a matter of course.  How does that
    differ from selling activity?  Selling activity shows up in the form of wider
    range bars to the downside, with a marked increase in volume activity.  The
    closes will also be on the lower end of the bar's range.  Supply selling is
    typically strong enough to take out previous support areas, whereas
    everyday selling activity will not.

     If you look at the bars from 21, 22 January, you can see how the ranges
    were wider to the downside,and volume was much greater, as price
    declined.  This led to the largest correction in several weeks.  When you
    look at the rally since 5 February lows, you see a clear absence of any
    supply selling.  However, you also see a number of small range bars that
    comprise the rally.  These smaller range bars reflect a lack of demand, not
    enough buying effort to extend the range higher.

     The channel drawn off the 5 February low, connecting with the 25 February
    low creates the lower line of the channel, and represents support.  The
    upper channel line is drawn parallel to the bottom line, using the 19
    February high between the two lows.  It acts as an oversold indicator, and it
    is called a Reverse Trend Line, [RTL].   You can see how price has been
    hugging it as it moves higher.  Right now, there is a convergence of the
    previous resistance high and the RTL, where price has currently stalled.

     What we know for certain is this:  for as long as there is NO supply selling
    entering the market, it does not matter how poor a showing demand makes,
    price will continue to work higher, as it has been doing.  The downside to this is that it will not take much for supply sellers to enter the market and cause
    price to go lower.  To date, the supply sellers have simply been unwilling to
    press their case, and top-pickers are being punished, continually.

     As long as the bars down are not wide, buying breaks at support points has
    to be the order of the day.  It does not make sense to chase this market and
    pay up to get long because it is too vulnerable to breaks.

    Proceed with caution.

     

    S&P D 15 MAr 10

    Themes: SPY, S P, QQQQ
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