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S & P - No Confirmation Yet That The Decline Has Stopped. Things Change.

Monday Evening  5 July 2010

 In the last article on 1 July, mention was made about a rally
potential, but on a "maybe" basis.  None, of any consequence
developed, and what was described as a weak market is living
up to that characterization. There is little need to get too analytical
here.  The trend has turned down, for some time now on the daily,
and more importantly, also on the weekly.  Price remains in an
oversold condition, and the caveat issued last time about oversold
conditions is that they can become MORE oversold.  Always wait
for a sign from the market before deciding a change has occurred.

 So far, none has.

 We still see the low from Thursday, third bar from the end, as
important for the near term.  The range was somewhat contained,
volume increased, and the increased effort rallied to close near
the upper end of the bar.  The only force that can close a market
on the upper end of a bar is stronger buying over selling efforts. 
One would not expect to see buying stronger when price is making
a new low, so that raises a red flag of caution for downside
continuation.  Keep in mind, price has been down eight days without
any kind of relief rally.

 

 S&P D 5 July 10

 A closer look at a 60 minute intra day chart shows that the market
has really been moving in somewhat of a sideways direction since
the 29th of June.  We also see the highest intra day volume
occurred on last Thursday.  There has been no downside follow-
through, and that day could be evidence of stopping volume, at
least temporarily.

 "Could be stopping volume" does not mean that it is until the market
confirms it.  Remember, the market HAS to confirm every aspect of
its activity before it can be established as true.  Given the weak
character of price behavior, it looks to us like last Thursday's low
could be exceeded, and if it is, we would expect it to be brief, with a
counter-trend rally then getting underway.

 If that turns out to be what develops, THEN we will be in a better
position to gauge where a counter rally would likely fail, and THAT
is where a short position will be entertained.   The obvious first level
of resistance is the 1035- 1040 area, where price clearly broke a
support range.  Previous support becomes future resistance.

 Elementary, as Holmes would say.  No place to pull the trigger, yet.

S&P 60m 5 July 10