Another Day of the Same

Last week I mentioned that the game was to take the average higher into the close and distribute shares or sell short-I can't tell which, but they did that a lot last week inside that zone of resistance. We're still in that zone although today the S&P-500 closed at a new high-exactly .05% higher! On declining volume too! In fact the lowest we've seen since April! So the dominant price/volume relationship shouldn't surprise you, Price up/Volume down-of the Dow 30, 19 closed that way, that's dominant! And.... it's also the most bearish price volume relationship of the 4 possible combinations-yes, even on an up day. We also formed a Doji day on the SPY, which shows a total loss of momentum and as such, it is a fairly good sign of a reversal-the Japanese have been using this system for over 200 years trading rice.

Whatever our mystery rally was about and I think it was about , well I'll tell you in a minute, the market is still doing nothing! Sure they are waiting for the Fed, and here's where I tell you my observation.

There have been about 5 events in the news, starting with Bernanke's Senate testimony in which the Fed has been leaking to the media or telegraphing what they are thinking and presumably what we can expect. Why? Remember the days of Greenspan's "Greenspeak", where he could say 10,000 words and you still had no idea what he was thinking and now we have the Fed right before a meeting tomorrow watering down expectations. Are they going to pop us with an early October surprise? I'm not sure if this economy has enough room to play politics. I wouldn't be surprised to hear they're going to warm up the printing presses, but then why does the dollar look so bullish? The only thing I get out of this is that they are trying to let us down easy so there's not another flash crash.

Look at Trade-Guild tonight, check out the Head and Shoulder's post, there's a point to be made there. We have exactly the same situation now as we did the last major crash, we're in almost the exact same place with the same price formations. There's that ascending wedge that we have seen develop the last few weeks and because it is so obvious, I'm going to say there's a decent chance smart money makes one final push-a false breakout just like they did with the last ascending wedge which marked the top and the start of a 50% decline in the market.

For new members, there's a lot of short limit orders, but there's some great short positions on the June list at June 3rd.

Maybe tomorrow they pop the market. One thing that almost always happens is the initial reaction to Fed policy is almost always reversed within a matter of days, so if we do pop up tomorrow, I for one won't be in a bull mode. There's good longs out there, but there's a lot of shorts as well. I noted last night how many ascending wedges I saw scrolling through about 500 stocks.

Tonight there will be no new trades as tomorrow is an uncertain day. As the TRIN index predicted today's close higher last night, it's now at .87, below .70 and the market usually closes lower the next day. Above 2 and it closes higher typically, last night it was 1.56 and that's why I expected a close higher today, but make no mistake, there was no accumulation driving this market, here's the proof...

The 60 minute 3C chart, besides the daily, it's the most influential, but the daily is not sensitive enough to pick up on the daily action in the wedge, If you look, you will see that 3C called every reversal up or down on this chart and it is now in a nasty negative divergence in the Ascending Wedge. I wanted to see how today traded, not the close, the underlying institutional investment, there was none besides market makers occasionally pushing a play on a 1 minute chart.  I do believe this is manipulation, there's selling/short selling inside that wedge into higher prices, someone needs to give enough support to keep prices stable or rising, but in the background, institutional or smart money seems to have hit the exits pretty hard.

So get those limit orders set up. I thank heaven someone actually did catch the SPRD trade today-remember-lock in those profits and make sure this doesn't turn into a loss. I prefer to take part of my investment off the table with a quick gain like that and let the rest ride with a tight stop. You can always buy back at the next pullback, but the markets are uncertain right now.

So that's it for tonight, I am going to sort through a couple hundred charts I have picked up on some of my TC scans and if anything jumps out as cash on the floor, I'll post an update tonight.

New members, welcome and I say it every night RISK MANAGEMENT-that is the key to your success and I know it sounds boring and you'd much rather get rich with a few incredible stock picks, and that's the way it happens, but your going to have to sort through some losers too and to get to those incredible stock picks you need to survive-risk management is what allows you to do that. I have a link on the top right to a nice article I wrote. If you have questions about it, send me an email, I don't care if it's midnight, it's that important.

Tomorrow should reveal a lot of the stuff we've been seeing. The nice thing is, we see a lot that the market doesn't. Look at the 3C chart above. Isn't that great? Every major turn is right there.