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S & P - Good News: A Rally! Now, How Far?

Wednesday Evening  7 July 2010

 Confirmation as to direction was resolved shortly after
Wednesday's opening.  Focus was placed on a 10 minute and a
60 minute chart, and we used both to get long at 1034 after it was
clear that the channel down was broken when price closed intra
day at 1031.  The extent of the rally and ease of movement to the
upside was surprising.  However, it occurred on less volume, and
that tells us that it was more of an absence of sellers, and a lot of
short-covering.  Because of that, we opted to take profits on half
of the position at 1054, during the last half hour of trade.  Stops
have been raised to make the position not only risk free, but
guaranteed profitable.

 Where to exit on the balance?  As always, it will depend upon
developing market activity.  Price closed in an area of resistance,
and if there is an apparent reversal of some kind, we will step
aside immediately.  How price reacts to the 1062 - 1075 band of
resistance will provide some clues.

 Additional, important information will come in HOW price reacts
on any decline.  If the ranges are smaller, in general, and volume
drops, it will tell us that there is still life in this developing counter-
trend rally.  The 1100 area is still a longshot target.

 The overall trend remains down, so loyalty to the long side will not
be strong because this is nothing more than an overdue correction.  
For now, there is a free and profitable peak to the upside, and it
came from exercising patience and waiting for market activity to
declare itself.

 No random walk theory here.

 

S&P D 7 Jul 10