Sunday, July 21, 2013


Well as giraffes say, you don't get no leaves unless you stick your neck out.
Okay so that low risk entry trade I spoke about last time didn't really work out.  However, the lesson here is that the loss was minimal since it hit above our theoretical stop loss of 1684.51 for small 8 point or 1/2% loss.  So we move on to the next opportunity. There will always be losses but the key is to make sure you keep the losses small but the profits larger. 

Lets look at the markets from a longer term stand point.  First I want to highlight the key areas of support and resistance.  Below the SPX PnF charts highlighting some of key areas of support and resistance we have been talking about.  Notice that they may be off by a point or two due to volatility but just as accurate all the same. 

Next I'm going overlay the above support and resistance levels over a weekly SPX chart and see what it tells us for a longer term perspective   Once again for those that are slightly visually impaired those levels are 1684.3, 1653, 1625.2 and 1597.3.  

You can see that recently the high volume down bars were actually transfers of ownership from weak to strong hands.  After a decent rally the big boys need to accumulate cheaper shares and they do that by shaking out the weak hands.  The bigger the shake out the stronger the rally.  Don't believe me? Just look at the last shakeout with two large volume bars and a drop to 1560 only to see this current four week rally ensure chalking up so far 130+ points.  

This week we saw the narrowest weekly price range since the week of May 6th.  Is demand weakening or taking a breather?  What happened in May was another up week followed by a six week drop.  Although anything can happen we should stick to the facts and those are that we currently above resistance of 1684 albeit slightly. The prices bars are closing near their highs which is signs of a strong demand filled market and volume (on a weekly chart) has been average.  If instead the large weekly price range bar for the week of July 8th was accompanied by larger than normal volume I would have been more suspicious of this week's narrow range bar.  That might have indicated exhaustion and big boys unload shares to the small folk at resistance.  So whats the verdict?  Its all bullish so far!  However, a close below support of 1684 on higher volume will change that.  For now we just have to follow the flow which is clearly up.  For those that use the term overbought I would appreciate a definition.  Just something to think about we you hear people use these expressions haphazardly.  

Thanks for reading!

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