Thursday Evening 22 July 2010
The short position we so strongly “argued” for turned into a loss, [See S & P –
Weakness Keeps Showing Up, Click on http://bit.ly/cH4aq4], and we were at a
loss as to how we missed seeing such a strong reversal potential. The answer
most always lies in how one is viewing a market. For us, the trend has been
down, and it is. However, for the immediate time, it is really in a trading range,
with another trading range within it. The chart shows this, below.
The June 1130 high is the upper range, and the July 1002 low identifies the
lower range. For the last several days, where we had been seeing weakness and
an eventual decline, another, smaller trading range has developed. 1100 marks
the high end, and 1052 the low end. This was hard to see after the decline on
Wednesday, mainly because Thursday had not yet occurred. In defense, and
often in truth, many phases of the market cannot be identifed until after the fact.
It turns out that Wednesday’s decline was a retest of Tuesday’s Outside Key
Reversal. Once trade gapped open higher Thursday morning, the rally was
unforgiving for the shorts. Resistance had still not been violated, and buyers
still had to prove their standing. Well, buyers did just that. The sell-off at the
close was profit taking, as opposed to new selling.
There has been no apparent ending action to this rally. That may change
tomorrow or next week, so until it does, we have to go with what is. The past
several trading days has been like pushing on a string for both buyers and sellers.
It is as simple an explanation as we can offer.
