Saturday 21 November 2009
For the weekly chart ending Friday, the S & P market is showing signs of a
tired buying environment where efforts may have been spent, temporarily,
at a minimum. This is a fairly easy read of market activity. The ranges are
very small at new highs for the move. Small ranges tell us that buyers are
unable to extend their rally efforts any higher, and last week said that quite
clearly. Price made new highs, but again on a small range that was a failed
upside probe.
Rallying above the recent highs uncovered no new buying. That being the
case, price declined on Thursday, and was unable to recover throughout much
of Friday. Note the horizontal line drawn from October 2008. That was an
extremely large range bar down where massive selling came in and drove
price lower. That vertical bar marked the beginning of ease of movement
to the downside, and typically, the high of that kind of bar will act as future
resistance because it was the starting point of important selling, and sellers
will defend it. So far, that has been the case.
Note how the selling bars from 2008 were wide range bars, and contrast them
with the rally bars of 2009. The rally bars are much smaller, and the move up
has been more labored in recovering back to the October 2008 sell-off highs.
The fifth bar from the end was the last time there was a lower weekly close,
and it led to a decent decline. The difference this time is the failed attempt
to go higher above that recent high. As we have been saying for weeks now,
volume has been greater on declines than on rallies. This can and will persist
only for so long before the reality of supply and demand efforts kicks in.
All this evident buyer weakness notwithstanding, sellers are even weaker!
One “fundamental” reason given for the decline in volume is that the lemmings
on Wall Street do not want to do any selling but just keep what profits they have
locked in so as not to jeopardize their year-end bounuses. So much for
consideration given to client interests. “Me-first” is still prevalent on Wall Street.
We are biased to not being long this market, for reasons amplified in the past
several months, and it appears that the market is bending. We continue to wait
for a break.
We are partially short, [not fully committed in position], from Thursday, with
stops of course, and we continue to look for weakness to sell, especially weak
rallies.
There is a distinct possibility all of this much ado about nothing in the stock
market could carry through to the end of the year, especially with a few major
holidays keeping many participants away. Cannot fight the tape, even a
lackluster one.
