Wednesday Evening 27 October 2010
The bulls have been struggling, and the bears have been AWOL.
That leaves the kind of market we have seen over the past few weeks.
Just when it looked like 1200+ and maybe a retest of April highs was
almost a certainty, the market fizzled.
What to think? Let us start with a monthly chart to see if it can help.
There are two trading days left in the month. Unless there is a
breakout that runs to the upside, as had been expected a few weeks
ago, if the month were to end around here, we can see that October's
range is smaller than September's range, yet volume for October is
higher. There is a mismatch here. Greater volume but a smaller range
suggests sellers are meeting the efforts of the buyers, or maybe more
accurately, buyers are simply worn out, for now. Were it otherwise, the
range would be larger and to the upside.
Given the lack of direction over the past few weeks, most everyone is
tired of the directionless trading range. We marked "start" on the chart
to compare where price is 11 trading days later, the last bar on the
chart. Just a tad higher on the close. Can we learn anything more
from the daily? [We did not include a weekly chart to not be totally
A trading range, and a clustering of closes can be one of two things:
1. a resting spell for continuation, or 2. a turnaround in direction.
Monday's new recent high with a low-end close gave all the
appearances of a stopping of the move up. Two days later,
Wednesday's upper end close on the bar tells us that buyers are
stepping in at lower levels. Wednesday's low was the same as last
Thursday's low, so we can say the market has near term support at 1168.
Because price did not continue and stay lower, it says Monday's close,
however poor in look, was not stopping action, as in reversing a trend
direction. Wednesday's rally off a 700 tic break to close near the high
is a counter point to Monday, and we can say there are buyers at lower
levels. Okay, so our point would be?
Not sure we have one, except to say that buyers have a slight edge,
even if only by default.
Can we learn anything from an intra day chart? Many times, yes,
but not this one. With price still contained in a multi-week trading
range, and the close within the range, we have a low level of
knowledge, LLOK on the chart
Is there anything to recommend?
Wait until there is a clear rally bar to the upside, on notably
increased volume and with a strong close, and then it may be worth
buying for higher prices. Unless and until we see some form of
ending activity, the higher swing highs and higher swing lows are
likely to continue.
For now, 50-50 odds are not worth the effort or the risk exposure,
and heroes do not last long in this business.