Wednesday, July 3, 2013

Same Old Same Old

"The stock market can be a cruel mistress."

I'm not quite sure who came up with that quote but it's far too deep for me.  I don't remember the stock market every satisfying me in that way to be referred to as a mistress.  The stock market has been more tame (boring) the past five trading days with price bouncing around 1601 to 1626.  What is interesting to watch is the way price reacts around not only the 1626 resistance area but the 50 day and 20 day moving averages (dma).  I've re-posted the SPX 30min PnF from Monday's post only to highlight the 1626.4 resistance area.  This continued at act as resistance on Tuesday (7/2) when price hit a high of 1624.26 before backing off.  Coincidentally, the 50dma was 1623.94 at that time and price closed below 20dma as well.

I'm going to do something different today and that is give my analysis of the past 5 daily trading bars highlighted in the chart below labeled with 1626.4 resistance and the 50dma and 20dma.

1st bar (6/27) -  Price hits a converging 50dma and 20dma area of resistance on the lowest volume in the past five trading days.  The signifies that demand could not muster up the strength to break that area of resistance.  Price closes near the middle of the price range. Neutral.

2nd bar (6/28) - This bar is actually very interesting for a couple of reasons.  First, the volume spike was considerable and price fell to 1601.06 before recovering slightly.  Second, 1601.06 is awfully close to the 1600.7 bottom we see on the above PnF chart before a rally ensued.   One might ask was this an transfer of ownership from weak to strong hand or strong to weak hands.  Typically when you see an increase in volume at or near support that typically is a transfer from weak to strong.  However, the next days up move confirmed it was the latter.  Neutral to Bullish (wait and see_

3rd bar (7/1) - Price rallied to the resistance area of 1626.4 and the 50dma (1622.91) where supply overcame demand (at lunch time) and price fell for the rest of the day closing below the 20dma. Bearish

4th bar (7/2) - Price again rallied to the resistance area of 1626.4 and the 50dma (1623.94) where once again price was met with supply (at lunch time again) and price fell closing below the 20dma. Bearish

5th bar(7/3) - Price behaved differently today (refer to the SPX 5 day 15 min chart at the bottom).  The past two days we saw rallies that we sold off at resistance.  Today we saw price open lower hitting a low of 1604.57 before recovering and continuing higher throughout the shorten trading day. Bullish.

The volume was low because the market closed at 1pm EST.  However, was this a test of the 1601.06 area?  If so then I would expect higher prices soon.  It has been my observation that price doesn't hang around the 20dma for very long and that typically a big move will transpire shortly after.  Our job is to react when it does and hop on board for the ride.  I was (and still kinda sorta am) expecting a drop back to the high volume area of 1576 but i'm not married to that position (i'm actually married to my wife).  A high volume jump over the 20dma, 50dma and 1626 resistance would get me on board for a continued move higher.  However, the facts are the facts and price is basically having trouble with this current area of resistance but at the same time prices really haven't fallen much.  So what do we do? Wait, see and react.

Thanks for reading.

SPX 3 month daily chart

SPX 5 day 15min intraday chart

No comments:

Post a Comment