Best of the Week
Most Popular
1.North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - Nadeem_Walayat
2.Researchers Find $10 Billion Hidden Treasure In A Dead Volcano - OilPrice_Com
3.Gold and Silver : The Battle for Control - Rambus_Chartology
4.Asda Sales Collapse and Profits Crash! UK Retailer Sector Crisis 2017 - Nadeem_Walayat
5.Deep State Conspiracy or Chaos - James_Quinn
6.The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - Plunger
7.Gold Stocks Coiled Spring - Zeal_LLC
8.Neil Howe: The Amazon-Walmart Rivalry Will Determine the Future of Retail - John_Mauldin
9.Crude Oil Price Precious Metals Link in August - Nadia_Simmons
10.Gold and Silver Precious Metals Nearing Breakout - Jordan_Roy_Byrne
Last 7 days
The Stock Market No Longer Cares About Trump - 21st Aug 17
The Coming Boom Of Productivity Will Get Our Economy Back On Track - 21st Aug 17
Buffett Sees Stock Market Crash Coming? His Cash Speaks Louder Than Words - 21st Aug 17
This Could Be The Biggest Gold Discovery In History - 21st Aug 17
Stock Market Correction in Full Swing - 21st Aug 17
Seeking Confirmations – US Stock Market - 21st Aug 17
The changing demographic of online gamblers - 21st Aug 17
Gold is a coiled spring… the breakout is here, fundamentals are in place, technicals are compelling - 20th Aug 17
A Midsummer Night's Dream: Buy Gold and Silver - 20th Aug 17
Gold Mining Stocks 2017 Fundamentals - 20th Aug 17
EIA Weekly Report and Crude Oil - 19th Aug 17
4 Insights for Adjusting Your Portfolio in a Rate-hike Environment - 19th Aug 17
Gold Direction Indicator - 19th Aug 17
Historical Inevitability and Gold and Silver Ownership - 19th Aug 17
You Are Being Lied To About “Low” Gold Demand - 19th Aug 17
This is Why Cocoa's Crash Was a Perfect Setup - 19th Aug 17
Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High - 19th Aug 17
North Korea Is Far From Being Irrational… It Has A Plan - 18th Aug 17
US Civil War - FUNCTIONAL ILLITERATES TRYING TO ERASE HISTORY - 18th Aug 17
Bitcoin Hits New All-Time High Over $4,400 As It Catches Paypal In Total Market Cap - 17th Aug 17
3 Psychological Ingredients behind Great Web Content - 17th Aug 17
The War on Cash - Rogoff, Orwell and Kafka - 17th Aug 17
The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - 16th Aug 17
Stocks, Bonds, Interest Rates, and Serbia, Camp Kotok 2017 - 16th Aug 17
U.S. Stock Market: Sunrise ... Sunset - 16th Aug 17
The Next Tech Crash Could Delay Your Retirement by a Decade - 15th Aug 17
Gold and Silver Precious Metals Nearing Breakout - 15th Aug 17
North Korea Showdown: Pivotal Market Turning Point - 15th Aug 17
Tech Stocks DOT COM Bubble Do-Over? - 14th Aug 17
Deep State Conspiracy or Chaos - 14th Aug 17
From the Trans-Atlantic Axis and the Trans-Asian Axis - 14th Aug 17
Stock Market Intermediate Correction Underway - 14th Aug 17
The Islamic State Jihadi Pivot to Asia - 13th Aug 17
Potential Pivots Upcoming for Stocks and Gold - 13th Aug 17
North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - 12th Aug 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Stock Market Higher Until Proven Otherwise. At Resistance

Stock-Markets / Stock Markets 2013 Jan 13, 2013 - 09:33 AM GMT

By: Michael_Noonan

Stock-Markets

We have a price target for the S&P e-Mini: the 1482-1488 area. That area is derived from Point and Figure, [P&F] used to measure market "energy," or the potential target that price can attain in a directional move. The market is already in an area where it can fail. The one caveat to any analysis pertaining to the stock market is an inability to assess market interference, [manipulation] by the central bank/Wall Street firm[s], doing everything possible to defy market gravity, and succeeding.


There were clear signs of a market sell-off, that began in earnest, starting in 2008. What was not known then was the extent to which the market would collapse. This is exactly why the Fed/Wall St has been intervening for the past year or two. They want to prevent the inevitable, inevitably making it much worse when reality is allowed to function without the artificial stimulus. Never underestimate central planners with access to unlimited fiat to boost prices.

The monthly closings in November and December, 2007, and the January high of 2008 are circled on the chart to see why the 1483+ area is potential resistance. When the P&F target area of 1482-88 is added for consideration, there is a price target synergy that merits heeding.

The resistance we mention remains potential because it must first be tested, and price must then fail, in order for a change in trend to be confirmed, and that change can be from up to just sideways. One does not act immediately upon this information by exiting long positions or establishing short positions, especially the latter. Price could stall at, and then proceed higher, or it could simply sail through that level and enter the 1500+ area. There must always be a reason for taking any action.

We rely more on horizontal support/resistance lines than trend lines because the horizontal lines are drawn from previous swing highs/lows where we know price failed at a specific area. We do have an upslanting converging triangle to show another form of potential resistance, and it happens to coincide with the horizontal and P&F numbers, giving a third independent tool for analyzing the market.

On the monthly chart, there is price synergy, but it ends on this chart. We did cover the importance of market synergy in our recent analysis of AAPL, when it failed at 700. For a comparison, see http://bit.ly/WB2vUk.

Contract changes account for the price differentiation in highs over various time frames. Current weekly price is under the monthly resistance level. The September high is the resistance area where price closed on Friday. This leaves more leeway for how high price can go on the weekly chart, and the room indicated by the channel shows just how much price can rally over 1500 before meeting channel resistance.

Last week was important. Barring an artificial price boosting, the weekly range was a poor showing for a bullish argument. In an uptrend, whenever you see a small range, especially at a potential resistance level, it says that demand is weak, unable to extend the range higher. When you compare last week's small range to the previous week's very wide range and strong close [seemingly], you have to ask, what happened to the buyers? Where did they go?

[We allude to a strong close because sometimes it can be exhaustion, and that could account for Friday's poor showing.]

Fortunately for buyers, they are a proven factor in an uptrend, and the onus is on the sellers to change market direction. However, a lack of demand, when at what appears to be an area of resistance, can embolden sellers and they become more active. We have not seen that yet, but it is important to be aware of the possibility.

There is no evidence of a market turnaround, at this point, yet there are pieces of evidence that point to potential trouble, spelled with a small "t," for now.

The daily chart hovered around the September high, seemingly offering resistance, but there was little reason to believe price would stop there. You can see the gap in price for the first trading day in January. When you view that bar, as is, and observe the next several trading days moving sideways, prior to the last two bars that rallied above 1460, price seems to be wavering. However, the story is different when the "true range" comes into play.

The true range includes the gap area from the previous close. Instead of viewing the range of 2 January as 1438 to 1458, the gap close from the previous day, 1420, makes the true range 1420 to 1458. Then, when you view the sideways activity, relative to the true range bar, there was very little "give back," or price correction, actually making the sideways move bullish. This was confirmed on Thursday, when price rallied to close at 1467.25. Then came Friday.

What happened to the buyers? Here was an opportunity to rout shorts and new sellers. It did not happen. Instead, price limped to close unchanged. Like we said about the weekly analysis, the onus is on sellers to make a statement of change. Buyers are a proven factor. Unless, or until sellers make such an altering statement, price should continue to work higher.

What everyone needs to be alert to is some kind of price weakness that does gain more recognition that demand is spent and supply is about to take over. That would come in the form of price failing at resistance with wide range bars to the downside on sharply increased volume, followed by weak, small range rally attempts, on less volume, that fails to recover lost ground. If you do not see it, do not believe that this rally is over.

By Michael Noonan

http://edgetraderplus.com

Michael Noonan, mn@edgetraderplus.com, is a Chicago-based trader with over 30 years in the business. His sole approach to analysis is derived from developing market pattern behavior, found in the form of Price, Volume, and Time, and it is generated from the best source possible, the market itself.

© 2013 Copyright Michael Noonan - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Noonan Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife