Sunday, October 27, 2013


I'll make this short with some interesting observations that right now are nothing more than a theory until I can spend more time looking at the historical evidence.  Below is a 15min PnF of the SPX which shows a break of the 1757.8 resistance.  Keep in mind this is a 15 min chart with a box size of 1.7 points on a 1750+ index that fluctuates on average 15+ points daily.  We use this timeframe  because the SPX is trading at all time highs therefore using a daily or even 60 minute timeframe will not be as helpful to investigate the battle of supply and demand due to the limited trading activity that has taken place at these levels.

I've highlighted the trading ranges (green boxes) that we have spoke about in the past several posts.  I've concluded that trading ranges are simply areas of accumulation/distribution before a larger move ensues.  Once you have identified the trading range upper (resistance) and lower (support) limits all one has to do is wait for a break in that direction to jump on for the ride.   This current move higher started with a break of the trading range from 1747 - 1741 where price quickly made its way to the next level of resistance at 1757.  What I'm finding interesting is the volume profile on these trading ranges.  What I've noticed for the past two break outs to the upside is the majority of the volume was transacted at the lower end of the range (support) prior to the break out to higher prices.  What I'm theorizing is that during a trading range that is representing an accumulation phase that demand is greater support (lower end) then the supply at resistance (upper end) allowing prices to easily break higher.  If this is true then the reverse should be true for a distribution phase.  That is what I would like to investigate further.  I'll keep you posted.

For all those calling for a top I don't see anything right now to suggest a bearish move. That would be anticipating a move that really has no evidence except for a number of hunches and gut feelings and the wonder of how much higher can this market move.   The daily candlestick chart shows another bullish close with price ending on the highs of the day indicating demand is still present.  Will there be a correction?  Of course there will be I just don't see anything on either chart (PnF or candlestick) that will tell me its happening tomorrow.  However, I'm  sure some Elliot Wave theorist might point out that we have now rallied approximately the same amount as the the end of August to late September rally of ~100 points.  So I guess we have to correct now?  Lets watch and see.

Thanks for reading.

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