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Auction Market Perspective Of A Potential S&P Sell Signal

|Includes: EnergySolutions, Inc. (ES-OLD)

Most forms of analysis use a concept of Value as a basis for predicting future price levels. Both technical and fundamental analysis use techniques that attempt to determine when a stock, and index or future or commodity is "fairly" valued, or over/under valued. The basis of this determination, for both fundamental as well as technical analysis, are things outside the market itself.

The gist of the worldview of a market through the lens of Auction Market Principles is that Value is determined by the actual participants in that particular market. Value is determined by where and how much trade is taking place. This is a volume based methodology but it measures volume in a unique and much more robust way than any other form of analysis that uses volume as a component. Volume in Auction Market Analysis is measure on the horizontal scale, not the vertical scale as volume is traditionally measured. - it is a time based measure of volume. Horizontal volume in a given time frame equals acceptance of Value in that area by market participants. The migration of High Volume Nodes (areas of relative high volume) provide an objective definition of the trend of a market.

These High Volume Nodes (HVNs) consist of a range of price and if a market begins to retrace the primary trend and begins to trade through previous HVNs it is a warning of a trend change.

The S&P cash, and its trading derivatives including SPY (spyders), and the ES (S&P mini futures) formed a bottom in June in an important HVN formed during May - June. The subsequent rally has produced a higher HVN in the S&P. If the S&P, SPY or ES close below the low of this HVN it is an initial sell signal. This level is 1341 basis the S&P cash, 134.50 Basis the SPY, and 1345 basis the September S&P mini-future (NYSE:ES).

An intermediate term sell signal will be confirmed if the S&P cash closes below 1309, the SPY below 131.00 and a close below 1303 in the S&P September mini-future contract.

Unless and until this happens, the trend of the S&P is higher.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I trade frequently and may be long or short any of the instruments mentioned based on my analysis in real-time.