Wednesday 4 August 2010
Since the last article, in what was construed as a key resistance area,
the market has ignored that potential resistance and continues to
hang just under the 1031 area, which is the 21 June high, and under
the 50% of range, around 1035, as additional potential resistance.
The downside anticipation we were looking for did not materialize,
and we ended on the wrong side of the market, up until Friday.
The chart below shows activity about 30 minutes before
Wednesday's opening. Price is hovering around the 1120 area, on
a closing basis, and this can either be a pause, leading to higher
prices, or the start of a turnaround. We favor higher, without
knowing how much higher, because there is no ending activity to
the current rally.
There is also a reverse trend line, [RTL], drawn off the July highs,
extending into the future, and that resistance dovetails around the
50% of range area. This is a point to watch HOW price responds/
reacts to it, IF the rally gets there. We may learn how strong or
weak the market is from the response.
Volume has dropped, and a few reasons may account for that,
Summer vacations being one, but the drop in volume occurs as
price is trying to rally. This is more a function of a lack of demand.
This less than strong reading remains in context of the 11 days
down from the 21 June high to 6 July low, with the rally now in its
21st day to yet reach the previous high. The rally is taking almost
twice as long to recover, and that, too, is a part of the evolving story.
We are watching developing market activity, in light of the above
analysis, waiting to see if price will fail slightly higher, or if it can build
a larger base for more upside continuation.
