Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

S & P - Failed Rally Leading To Weakness? Needs Confirmation

Wednesday Evening  28 September 2011

 In our previous article, we mentioned if the market were to rally, it
was important to gauge the character of it, based on how the rally
unfolded.  1158 was the area selected for resistance, but price went
higher in overnight trade, to 1190, and it we were not able to "read"
the how of the rally, for activity is not as it is during the day.  The
1190 area was noted as the starting point for the last decline, on
strong volume, and recognized as resistance.  However, our sights
were 32 points lower, as noted.  [See S & P - Let The Market Lead,
click on, see last chart].

 This chart includes the comment made on the 24th, and it is updated,
showing where we thought the market might hold, but went higher. 
Because of the harder to read overnight trading, the initial selling
from the day session stopped, and held above previous resistance at
1158+, now potential support, and confirmation of some kind of 1190
as stopping activity was required.

 You can see that the overnight activity leading up to Wednesday's
trade had larger range bars and good closings, so it "looked" positive. 
When price gave way at 1160, [6th bar from the end], it was the start
of confirmation that 1190 would likely hold, but starting to sell at the
1155+ area had too high a risk to initiate a sort position, placing a stop
above 1190, even 1180.

 S&P 65m 28 Sep 11

 Switching to a daily chart, it is evident that price is in the middle of
the two month trading range, and in the middle, the level of knowledge
is at its lowest point because price can go either way and still remain
in the range, a virtual coin toss.  There is no edge.  What remains to
be seen is if the weakness picks up momentum and carries price
straight down to 1120, then 1100, of it the middle of the trading range
will buffer a decline and be more two-sided.

 In futures, anything can happen, and the S&P has not been easy for
the past few months.  We prefer waiting for clarity rather than take on
risk sometimes hard to define.

S&P D 28 Sep 11