Tuesday Ides Of March 2011
This has not been an easy market. So many times, volume on
declines increased, a sign of weakness, yet price kept rallying
back. Sharp drops followed by quick rallies, defying technical
odds, but finally the true indicators held sway and price gave
way. We have said many times in the past that it was hard to
be long, for when the market turned, it would be with a
vengeance, and a 39 point overnight decline bears that out.
It comes as no surprise that such a fast and deep decline puts
the market in an oversold condition. As we read the daily bar,
it shows price closed slightly above mid-range, letting us know
there were buyers at the lower end. If buyers were not present,
the close would have been lower. What we will likely see from
here is a reaction rally, after what can be called "stopping volume."
An intra day chart gives a clearer picture.
The surprising extent of the downside damage occurred in
overnight trade. By the time the day session began, price did
not go any lower. You can see how the highest volume bars
were when the market was rallying throughout the trading day.
It is always possible that price can go yet lower, but we think not,
at least not yet.
Resistance begins at the 1280 level, and price had trouble
holding above it, Tuesday. What we get to do now is assess
the character of the rally, looking for weak rally efforts and lower
volume for establishing a short position. the 1220 area, +/-, looms
as a target.