Tuesday Evening 7 September 2010
It can be readily seen from the weekly and the daily charts that price
is currently in a trading range. What can best be said about trading
ranges and that the level on knowledge is at its lowest, for price can
go either way. With odds at 50-50, there is no edge. The message,
for anyone who does not want to lose money in the markets, is to NOT
participate when there is no edge. Just that little rule alone will improve
the win/loss ratio. If that rule in not in your arsenal, you would do well
to add it.
Back on 29 August, our article stated: Market Dictates Flexibility,
[http://bit.ly/9UuoMU], where mention was made of a potential rally to
1130, but all identified within a larger trading range. Just as it looked
like sellers were about to rout the buyers, a few days of strong buying
volume saved the day, last week. The weekly chart shows last week
to be a key reversal to the upside as price rallied without respite for 3
days to close on the high. Will it have follow-through? It should, but
that is just an opinion, and the market has been known to ignore what
we think. We cover the trading range on the daily chart, next.
Worth pointing out is that fact that when the 1200 level gave way in
2008, from the last swing high to the low on March 2009, the decline
covered 29 weeks in time. It has since taken 59 weeks, twice as
long,to recover the decline. Contrast the wide range bars as price
declines, showing greater ease of movement, with the smaller range
bars throughout the Federal Reserve-sponsored POMO rally to the
April 2010 highs. [POMO = Permanent Open Market Operations].
Even with all the fiat the Fed threw into the markets, the going was
labored...relentless, but labored. Since the April high, see how the
character of the bar ranges has increased, once again as price
declines. Just an observation.
The failed rallies in June and August are close enough to the
halfway point, and it is that dreaded middle of the trading range
location where the level of knowledge is at its least. Even though
the overall trading environment is negative, the strong volume and
three day rally gives the last edge to the buyers. What is needed
now is for buyers to demonstrate they can continue to control the
market, and it will take more than a concerted effort, given the
levels of resistance that must be overcome.
There was some give-back today, and it may be just a normal
correction. If the correction lasts for just another day or two, and
the ranges get smaller with decreasing volume, and if price can
hold the 1076-1080 level, there may be cause to take a long
position. That is putting the cart before the horse, but it does
outline a plan, should activity develop in that manner. That is not
a prediction, rather it is an "If this, than that" idea. If "this" does
not happen, "that" is no longer a consideration. Simple as that.
Like we said last week, one must be flexible as the market meanders
up and down in this trading range. At some point, there will be a
better clue as to market intent.