Last time we mentioned that up was the path of least resistance highlighting that although the market was moving up on decreasing volume that supply wasn't really entering the market. That looked like it was changing yesterday when the markets dropped on an increase in volume. However, the key was to know that 1697.2 was a previous area of support and resistance that was developing almost two months ago. Don't believe me then read it here. Alternatively, you can just look at the PnF charts below. Understanding that 1697.2 was a potential area of support one could of waited to see if it broke before deciding to sell any existing long positions or even initiating a new long position if the level held. Well the support level held and the US Congress came to the rescue to with a deal to address the debt ceiling. Markets rallied as one would expect and headed to the only remaining area of potential supply at 1719.9.
The PnF charts below highlights the 1719.9 (to 1723.6) potential supply area. I posted a comparison of the the two charts from Oct 14 to Oct 16. I kept the box size the same to show how the volume profile is developing as it is a good lesson in looking at supply and demand at key support and resistance levels.
1719.9 area is currently resistance but looking at the daily picture you can see that today's price action was decisively bullish with price closing on its highs (again) and with volume increasing. The market looks to have its sights set on new highs but first things first and 1719.9 area needs to be overcome. Should be interesting.
Thanks for reading.