Thursday 29 April 2010
The single-most important bar right now is on the 60 minute chart. It is the
high volume bar that spilled to the downside when price broke on Tuesday.
That is where supply [sellers] entered the market in a big way and
overwhelmed demand [buyers]. It is more than a line in the sand. It is an
area where price will be defended by sellers, and buyers will have to
overcome that strong effort...if they can.
We also marked the 50% retracement area to act as a guide. If price
struggles to get past the half-way point, it will be another sign of weakness.
It comes in around the 1197 area, but keep in mind, it is only a guide, and
it represents an area, not an absolute number. Resistance becomes more
formidable as price gets above the 50% area to the high of the large sell-off
bar, 1208. If you look at the two bars just to the left of that high volume
down bar, the 2nd and 3rd bars to the left of it, you can see how price
found some support at that same 1208 level, just before finally caving in.
Yesterday's intra day activity had a somewhat positive undertone. Note
how there was no downside follow-through after Tuesday's rout of buyers
that gave way to sellers acting with impunity. The last three bars have upper range closings, telling us buyers won the "battle of the bar," and the 5th bar
from the end, a retest of the Tuesday low, also closed upper end. Buyers
were present, and we remain mindful that all corrections since the February
low have been two days, maximum, of lower lows.
What is key for today is to watch the caliber of any rally, today. If there are
signs of weakness, going short are the marching orders here, leaning
against Tuesday's high of 1208. That is the plan. It is very simple, and now
it is time to work it.