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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 - Market Showing Weakness. Needs Downside Follow-Through. 0 comments
    May 14, 2010 12:33 AM

    Friday  14 May 2010

     The market showed the kind of weakness in Thursday's rally we wanted to
    see, within the down trend, to warrant a short position.  The previous two
    trading days had smaller ranges and rallied on decreasing volume as price
    approached anticipated resistance.  Yesterday, price rallied to a slightly
    higher high, but as the end of the trading day neared, began to fall on
    increasing intra day volume.

     An important point to make is in noting the first sell-off low from contract
    highs, the second bar after the 1216 high.  The low that day, 28 April, was
    1176.75.  The rally high from yesterday was 1174.75.  This leaves a little
    space of 2 points that the rally could not fill.  That is a subtle bearish
    implication, showing the market rally was weak, in that regard.  There was
    more.

     We had 1175 to 1185 identified as a zone of resistance, [see chart with 
    horizontal lines, S & P - Rally Into Resistance,].  The small range rally on
    decreasing volume was unable to reach that area, and that, too, tells us the
    character of the rally is weak, and it should lead to a resumption of the
    down trend.  Next chart.

     

    S&P D 13 May 10

     

     This is a 30 minute chart that shows how narrow the bars are at the high,
    contrasted by the wider range bars when price declines.  The day session
    high was 1173.  Around 9 a.m., CST, price made a low, 1161.75, and then
    rallied to close at the upper end of the range, [the bar is located in the
    middle of the session].  That activity had to be respected  as a show of
    strength.  We waited for a wide range bar with a low end close, underneath
    the trading range ,to confirm a resumption of the down trend was likely
    underway, and that was a place to get short, third bar from the end.

     What we need to see on Friday is continuation of the exhibited weakness. 
    The expectation is for a retest of the lower levels from last week.  The initial
    support target is the 1141 area.  How the market gets there, if there is a
    decline, will tell us the likelihood of where price may eventually go.

    S&P 30m 13 May 10

    Themes: S P, SPY, QQQQ
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