Wednesday, August 7, 2013

Lack of demand

Just like this blog there was a lack of interest by market participants not only to read this lousy blog but in pushing the market higher after Monday's small range day on low volume.  At first glance I viewed it as lack of supply but Tuesday's drop closing below the lows of the previous two trading days made it obvious that Monday was actually lack of demand.  Isn't hindsight wonderful!  Tuesday's close was accompanied with an increase in volume indicating that supply was entering the market.  We still had the 10 day and 20 day moving average (dma) to provide support and then of course our PnF defined support at 1684.3.  So what did today look like?

Below is the daily SPX chart with the above mentioned price points.  Today's intraday low hit our support level to within .61 of a point (pats himself on the back) but also notice that the 10dma acted as resistance and the 20dma acted as support on a closing basis with volume increasing.   Furthermore, price closed near the top of its price range today which indicates demand was present at these levels of support to push price off its lows. If you have been paying attention to my blog and in turn learning to because a stock market guru you would remember that support is where you expect demand to overcome supply which is what exactly happened today.

The next chart below is the 15 min SPX chart which highlights the concept of a test of support and subsequent retest on lower volume before a move higher.  The lower volume on the retest is an indication of lack of supply so the downward pressure is minimal and the market is allowed to move higher.   So where do we go from here?  Well the past two days now appear to be accumulation and after today's bounce from support and closing above the 20dma the trajectory is up.  If it does continue higher are next inflection point would be the all time high of 1709.36.

Thanks for reading!

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