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S & P - Plan A Or Plan B? Let The Market Develop.

Friday  30 April 2010

 It is the end of the week and the end of the month for printing chart closes. 
There may be some "window dressing" going on to make things look as
good as possible.  Who knows, who cares?  We deal with what is.  The
"battle lines" have been drawn on the chart below.  What can be seen from
this 60 minute chart is a tug-o-war between the forces of supply and
demand.  The straight lines indicate the swings from high to low, low to high.  What is most apparent is that the movement is sideways.   There is  no
trend.  Well, on a weekly and monthly, the trend is decidedly up, but the
larger time frames are not  timing indicators. 

 There are a few pieces of important information we can glean from this
chart.  1. the largest bars with the highest volume have been to the
downside.  2. the price swings are larger to the downside.  In fact, the
recent decline that started on Tuesday is the largest decline since the
February low.  It is for these reasons that we surmised this can be a
distribution phase in the market that will lead to a sizeable correction, if
not trend-ending.  We discussed distribution, recently, that gives our
reasoning of thought. [S & P - Great Example Of Changing Information].

 Our plan was to sell a weak rally, [S & P - Keep It Simple], however, one
did not develop, and we sent a follow-up indicating same.
[S & P - Keep It Simple, Part II].  There was a clear plan, but all of the
conditions did not develop, so there was no reason to execute.  The plan
is still in place and for all of the reasons provided, BUT...we are mindful that
this is the end of week, end of month, and forces may want to close them
out on a positive-looking note.  It happens.

 What is needed, in order to execute the plan, is proof that is it likely to
work.  That proof would come in the form of price rejection, an ease of
movement to the downside.  Unless and until we see evidence of that,
market-driven information, the message of the market is there is no
immediate trend, and the prevailing higher time frame up trend, [weekly,
monthly] can still flex its strength and give the market another boost up. 
We allowed for that potential in
[S & P - Great Example Of Changing Information], just after the distribution
comment.

 Whenever price is in the middle of a trading range, it can go either way,
and that is the equivalent of a coin toss, 50-50 odds, and that is not good. 
There is no edge.  The level of knowledge for making an informed decision
is very low.  Stay away would be the message.

 If we see ease of movement down, on increased volume, a short position
would be warranted.  If not, we prefer to wait for additional information before venturing forth.  It is the market's game, but we play by our rules.

 S&P 60m 30 Apr 10