Thursday Evening 24 February 2011
Opinions and expectations abound, but the market does what it
will, anyway. We thought a rally would ensue, but price went yet
lower. In the last chart, a second horizontal line was drawn to
show how support [and resistance] is an area and not an absolute
number. As it turns out, the lower low from yesterday went into the
area we identified as support. [See S&P - How Is The Next Key,
click on http://bit.ly/eWgo5r, first paragraph].
Here is yesterday's chart. It looked like the lower channel support
line would hold the two day decline, and from there a rally would
commence. The second chart shows how the area came into play.
The next chart includes Thursday's activity, and the area identified.
We discussed the qualitative difference between the second bar
from the end of January decline to that from Wednesday's low.
Now one will be made between Wednesday's and Thursday's bars.
Volume is still running high. Thursday's range is smaller than
Wednesday's range. [Ignore the last little bar which is the overnight
activity going into Friday.] The close is in the upper portion of the
bar, opposite of Wednesday's lower end close. The continued high
volume and improved close location tells us that buyers are trying
to stop the decline. The fact that the range is smaller also supports
1320 was identified as an area of resistance. It was also a half-way
retracement. With a lower low, the 50% point is now 1317+, so we
have a target area to observe how price responds to a rally, if we
are to see one, and it seems likely. It will be interesting to see where
Friday's close is, for it will conclude the weekly range and tell a
further story about the market's condition, yet to be determined.
All we can do is wait to see how the next rally unfolds, for it will put
the market into a clearer context for continuation or change.