Friday 30 April 2010
It is the end of the week and the end of the month for printing chart closes.
There may be some “window dressing” going on to make things look as good
as possible. Who knows, who cares? We deal with what is. The “battle lines”
have been drawn on the chart below. What can be seen from this 60 minute
chart is a tug-o-war between the forces of supply and demand. The straight
lines indicate the swings from high to low, low to high. What is most apparent
is that the movement is sideways. There is no trend. Well, on a weekly and
monthly, the trend is decidedly up, but the larger time frames are not timing
indicators.
There are a few pieces of important information we can glean from this chart.
1. the largest bars with the highest volume have been to the downside. 2. the
price swings are larger to the downside. In fact, the recent decline that started
on Tuesday is the largest decline since the February low. It is for these
reasons that we surmised this can be a distribution phase in the market that
will lead to a sizeable correction, if not trend-ending. We discussed distribution,
recently, that gives our reasoning of thought.
[S & P – Great Example Of Changing Information].
Our plan was to sell a weak rally, [S & P – Keep It Simple], however, one did
not develop, and we sent a follow-up indicating same.
[S & P – Keep It Simple, Part II]. There was a clear plan, but all of the
conditions did not develop, so there was no reason to execute. The plan is still
in place and for all of the reasons provided, BUT…we are mindful that this is
the end of week, end of month, and forces may want to close them out on a
positive-looking note. It happens.
What is needed, in order to execute the plan, is proof that is it likely to work.
That proof would come in the form of price rejection, an ease of movement to
the downside. Unless and until we see evidence of that, market-driven
information, the message of the market is there is no immediate trend, and
the prevailing higher time frame up trend, [weekly, monthly] can still flex its
strength and give the market another boost up. We allowed for that potential
in [S & P – Great Example Of Changing Information], just after the distribution
comment.
Whenever price is in the middle of a trading range, it can go either way, and
that is the equivalent of a coin toss, 50-50 odds, and that is not good. There
is no edge. The level of knowledge for making an informed decision is very
low. Stay away would be the message.
If we see ease of movement down, on increased volume, a short position
would be warranted. If not, we prefer to wait for additional information before
venturing forth. It is the market’s game, but we play by our rules.
