Thursday Evening 3 June 2010
What does the size of a trading range mean? In an uptrend, it could mean
a lack of demand, or it could mean sellers overcoming buyers. Volume
would give a better indication of which is which. Looking at Thursday's
range on the daily chart below, [ignore the last little bar as it is the start of
the evening session], the range is small, relative to the last few weeks. We
can also see that volume is one of the lowest in several weeks, as well. We
attribute this read to a lack of demand, and it is occurring at an important
area: previous resistance from last Friday.
What does it take to make a rally? Demand. Increased volume. What is
needed for a rally to break through a resistance area? Strong demand. A
wide range bar. Without them, sellers may take over. Thursday was not a
wide range bar, and volume was relatively weak and at a point of resistance. The rally failed to take out last Friday's key reversal high, which was a sign
This puts Thursday's smaller range bar into a perspective that says, if price
does not rally, with volume, through the overhead resistance, this rally could
be in trouble. Big Trouble, or little trouble? That remains to be seen.
We can ignore the last 8 bars on the 60 minute chart for they are the
evening session. What the intra day chart shows is how price initially tried
to rally through resistance from the 28th, last Friday's key reversal day.
Thursday's early high reached 1105, but from then on, the market
weakened, yet again after a rally, and sold off almost 15 points to the 1090
area. The next four bars after the low shows the rally going into the day
session close and failed to make new highs.
The message of the market is addressed here frequently. It is always
subject to change as new activity develops. We are seeing a higher swing
low on June 1st, and that is a plus for a rally. The character of the rally for
Thursday, [which includes the Wednesday evening session], was newly
added market activity, and its message says the positive message from the
higher swing low may be problematic.
What we cannot know is if the trouble is minor, or of a greater implication.
As "luck" would have it, this mixed message leads us right into Friday's
unemployment report. If price does not push through the overhead
resistance on wide spread and increased volume, the market's message
may be telling us that more retesting of the 1060 area could be in store.
The good news is, we do not have to guess and take a position in advance,
hoping to be on the "right" side of the market. Instead, we know what signs
to look for that will tell us which way the market is heading and THEN go with
the momentum, IF we can find a relatively low risk entry that will give us an
Waiting for the edge.