Monday Evening 14 February 2011
It is clearly apparent from the chart how narrow Monday's trading
range was, the smallest since the end of 2010 holiday trade, and
volume was anemic, as well. What does that mean? For sure, it
is a distinct lack of demand, a sign of a tired market. A subtle
sign that should raise concern is the position of the close. It is
mid-range, not at the top as has been the case for the last several
trading days. Whenever price closes in the middle of a trading
range, it says buyers and sellers were even, a draw. The question
to be asked is why, at the highest point in the current rally, are the
trading range and volume so small? Buyers are supposed to be in
Does this mean "The End Is Near?" Of course it does, but as we
ended out last article with a caveat, the market is "likely to continue
higher." At some point, there will be an end. We are not trying to
call a top but just issue a caution. There is absolutely no reason to
be short, and there is less and less reason for being long. Those
who are long should be using tight trailing stops. We could see a
correction, back to the 1300-1305 area, assuming a continued
The November 2010 high was 1120. The January swing high was
1300, an 80 point gain. 1321 qualifies as a small swing high, only
a 21 point gain. The point of the point gains is to demonstrate how
they are becoming shorter. This, too, is an indication of a tired
market. A potential correction to the 1300+ level would be a status
quo market reaction. At some point, the correction will be larger
and volume greater, signaling a much larger turn, but until that
happens, it is nothing more than potential.
Caution to longs is warranted. No action is recommended for shorts.
The market will do what it will and leave "foot prints" in the process.
We continue to track them.