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S & P - Always Expect The Unexpected. Anything Can Happen, And Often Does.

Tuesday Evening  20 July 2010

 Yesterday's article is a bit amusing for saying that the market looked
weak, then adding the qualifier: for the near term. [See S & P - Market
Still Looks Weak, Near Term
, click on http://bit.ly/9Sgnwn].  Just the
day before was a long term perspective saying the market would
eventually retest the 750 lows, [See S & P - A Longer Term Outlook
For The Market - Bleak
, click on http://bit.ly/c2XM9v].  We also added
that for as bleak as that outlook was, it would take time, and the
market could enter into a trading range, first.

 As the market developed, activity was weak on the opening, and that
was the extent of the "near term," for price then embarked on a rally
that was 35 points higher from the low.  The fast turnaround also
speaks to the second paragraph that analyzed the small range
Monday bar.  We said it could look like sellers were unable to extend
the range lower, but said that it was the buyers who failed to carry the
day.

 It was both, and in that order.  The market did continue to sell off
early, but by the end of the first hour, buyers stepped in and took
control, gaining momentum as the day evolved.  An anticipated
support was the 50% retracement of the 1050 area.  Once price
held, half of the sort positions were covered at 1054.  That will be
covered in the 60m chart.

 On the daily, the small bar from Monday helped lead to the
dramatic turnaround, creating a wide range rally bar with a strong
close.  One thing about those kinds of closes, especially when
going against the trend, is that they can also be exhaustion-type
rallies.  Rather than guess at what may happen, after covering
short positions and going flat, watching from a neutral stance is
called for.

 

 S&P D 20 Jul 10

 Short positions were initiated on Friday the 16th, at 1074.50, just
after the wide range bar that broke the trading range.  When it
became apparent that the 50% 1050 support area was holding, at
least initially, half positions were covered at 1054, just after the low
bar on the chart.  As price held the small rallies, intra day, a
determination was made to cover the balance, at 1063.75, just two
bars later. 

 The next bar retested 1060, and price never looked back.  The
rally was steady and strong with very little correction.  The final
rally high bar that topped at 1085 had the highest volume of the
last two days, and the close was off the high.  This is a sign of
sellers present at the highs, and a reminder that the trend is down,
and this is a counter-trend rally.

 This little review is to show how one has to be flexible in the
markets and not be lulled when carrying a position, long or short. 
Paying attention to developing market activity is crucial to avoid
costly mistakes and to take as much from a position as the market
allows.  Who would have expected, after a 35 point drop on Friday 
when price failed at resistance, that two days later there would  be
an equal 35 point rally?
 

 It does not change the overall picture, but it does say that nothing
can be taken for granted.  In the end, for every day, no one is bigger
than the market.  By respecting it, one can consistently do well over
a period of time  and keep risks manageable.

 


S&P 60m 20 Jul 10