Thursday, August 22, 2013

Another range?

During my break at work (as I would never dare watch the markets on the company's watch) I loaded up a 15min SPX PnF chart and of course copied it and posted it below. You can see the time was 12:40pm and you can also see the importance of the area 1656.4.  So it is a coincidence that price closed at 1656.96 today? Maybe?  As amazing at that is that isn't really what I want to discuss (read the title for a clue).

Below is a traditional daily PnF chart of the SPX highlight two price points where significant moves occurred in the past once they were broken.  These price points also tells us where the battle of supply and demand may happen again.   If you understand that then you will understand that the 15 min PnF SPX chart above is showing you that this battle of supply and demand is happening right now is what many would call a trading range. Many believe that a trading range a stalemate in the battle of supply and demand.   I don't.  I believe a trading range is a phase of accumulation or distribution and once that phase is completed then price will move in accordance to that phase (accumulation = up, distribution = down).  The longer trading range last and the larger the volume is during that time will dictate the potential move.    The last trading I spoke about lead to a quick sharp decline from 1684 to 1640 in a matter of a few days.  Just as we spoke about regarding that trading range, we once again have to look at price and volume for clues as to the potential move.
Below is the daily SPX candlestick chart and you can see that the 50dma is acting at resistance ever since it broke that level a week ago.   Although today's price action was bullish with price closing near the highs of the day the volume was rather weak.  Actually it was one of the lowest volume days for the month.  We all know to break resistance you need volume (demand to overcome supply).   However, as I've been harping on this blog we don't anticipate we react.  That means this could all change tomorrow but don't be surprised if we reverse lower.  If we don't and we move higher out of the trading range will then we jump on for the ride.

Thanks for reading.

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