Tonight I want to examine the short-term technical picture on the S&P.
A 5-day sell signal was triggered within an 18-day (monthly) down trend on Jan 9 2009. Figure 1 shows that yesterday we had relatively high volume and a below average range day. What this means is yesterday, the buyers were able to support the market - normally large selling volume (see Figure 2) should result in at least a normal range down.
Normal or large volume and below normal range is a buy setup. But since the trend is down, I’d use the setup to trigger closing out a part of the short positions.
In addition, the Market Profile (see Figure 3) had a Failed Auction (a single print) at the ‘E’ period with a subsequent range extension in “I”. The Failed Auction suggests we should revisit 874 within 5-trading days. Failure to do so suggests a weak market. (See Figure 3)
Today we have gapped down and the test-opening suggests we will not cover the open-gap in the Initial Balance i.e. the first 90 minutes. If we fail to cover the open-gap in the Initial Balance, I expect to see a trend day down.
If a trend-day down occurs, I’d expect to see a challenge of the 2002 lows at 788 basis cash.
FIGURE 1 5-day RePo
Figure 2 Normalized Volume Daily S&P
Figure 3 Failed Auction
Refer this blog post to a friend or colleague…
