Click on above image to enlarge & see 8/1/10 for how to interpret the top 3 charts
Today's trading was very tight and controlled. They did manage to bring us up to the highest level at the bell creating a tiny ascending triangle with today's hourly bars which you can see if you look very closely at the 3rd chart on the second row above - the S&P500. Trading is literally clinging to the underside of the lower green channel line but the fact that today's action did produce that small triangle pattern means they are determined and should have no problem taking the market back up into the green bull channel tomorrow. Chart 2 & chart 3 on the second row of the charts above all represent the S&P500 - symbol SPX. The first chart on row 2 is the SPY index ETF, a trading vehicle which mirrors the S&P 500 trading precisely. Because it is a tradable entity it effectively shows the daily trading volume on the S&P 500.
In the second chart on row two above, you see today's candle used the gray 150 MA line for support and peaked above the brown 100 line just briefly and should have no problem finally breaking out of this bundle of traditional moving averages that is shown. When a stock is mixed in between these moving averages and they are close together as they are now, it's called being in congestion and the market is not going either way very far until a breakout happens to the upside or downside of the congestion of moving averages.
On the first chart of row 2 we see the 5 EMA is starting to slide up the green 10 SMA which should give it nice lift tomorrow. Also the open air retest I mentioned a couple of days ago can be seen between the third and fourth bar back on the same chart. The lift that is obtained from a "lay-up" bounce of the 5 off the 10 is much stronger when the red 5 hugs the green 10 tightly with no space inbetween and then the red starts curving up and pulling away from the 10 for a successful retest. The slightly up in the air retest we saw the 3rd and 4th bar back will have to do even if it's technically low quality. To further highlight traders disdain for such a low quality setup you only need to look at the volume bars at the bottom of that chart and you will see that Fri, Mon, & Tue, the volume declined quickly each day when normally it would be increasing each day in a higher quality 5/10 retest setup.
The large chart of row three is the 6 year chart of the S&P 500 showing the huge blue line mother channel that has been going straight sideways since Jan 1997. It also shows the black line channel which is the recovery channel that began in Jan 2009. Plus it shows how we are in a downhill channel since Oct 2009. The center line of the 9 month long downhill channel is also visible up in chart 3 of row 2. Notice how that chart shows that we set down on that centerline on Friday for support. Which is another reason they had to gap the market up on Monday, they could not take the chance of losing the support they got from the centerline of the 9 month downhill channel.
Although a low quality start, if we get the up move tomorrow then it worked anyway.
Alan
