Created on: 10/13/2011 4:17:47 AM GMT Last Update: 10/30/2011 5:50:59 PM GMT Posted by: RTT
WARNING: This entry is 1166 days old. It may contain broken links, out-dated or misleading content. Please read on with caution.
Richard Wyckoff Tags on the SP500 (212)
Seriously this is real fun. Here we tag the SPY (SP500 ETF) with the Wyckoff bar by bar tags found via the Richard Wyckoff method. Once you complete this exercise you actually get a very good market view that you can profit from.UPDATE4
Please read this after you review the Gann Angle SP500 review.
More on the "Up Thrust after Distribution (UTAD) " (Phase C) from the distribution phase explanation chart. (Scroll down)
Phase C may also reveal itself by a pronounced move upward, breaking through the highs of the trading range. This is shown as an upthrust after distribution (UTAD). Like the terminal shakeout in the accumulation schematic, this gives a false impression of the direction of the market and allows further distribution at high prices to new buyers. It also results in weak holders of short positions surrendering their positions to stronger players just before the down-move begins. Should the move to new high ground be on increasing volume and relative narrowing spread, and price returns to the average level of closes of the TR, this would indicate lack of solid demand and confirm that the breakout to the upside did not indicate a TR of accumulation, but rather a formation of distribution.
The lack of a sign of strength not found within the current Sept-Oct SP500 sideways pattern gives us a bias to say this pattern is one of distribution and more lows can be expected. Sure we can get a punch up to 126, but this would most likely be a suckers rally before the real selling starts (read up on UTADs).
CAUTION: There is something going on in the markets. As some major stock cycles are turning bullish. We expect a XMAS rally but from what level: SP500 1200 or SP500 900, hmmm wait and see.
Our view would change if the current rally attracted good volume days in a row. Nothing yet. Do you smell a massive chance to short this beast and all other risk on assets. We do, watching for volume to confirm or deny this view.
NOTE: The tags "No demand" are from Tom Williams work.
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UPDATE1: Yahoo Tech Ticker: Poor old Bald Mackie wouldnt know a distribution pattern if it jumped out of his pants. Richard Wyckoff was a chartologist, he mapped out what a distribution pattern looked like. It's this simple folks distribution patterns have "signs of weakness (SOW)" within it, and a accumulation patterns have "signs of strength (SOS)" within it. Have you seen any strong rallies with good volume in the current pattern. Mackie states that 1220 as an important number, this is a good reason to expect the Wyckoff composite man to punch through 1220 to sucker folks into a false break out (like a 4 to 6 day up thrust). Of course one has to understand a melt up on very low volume can surprise all. So watch out.
UPDATE2: Goto to a chart now, pull up MDY or IJR (mid and small cap ETFs). It is said that small caps lead a rally. At the moment they have failed to join the party. This is NOT a good sign, it is such a bad sign it may be time to get a second mortgage on the house and buy SPY puts. A good rally that equates to a Wyckoff 'Sign of Strength (SOS)' is broad based with good volume. Therefore unless volume gets heavy on the upside we see current pattern as distribution waiting to break lower. If you want the real truth HFT or computer programs work best on large caps (via ETFs: SPY, QQQ, DIA), not so much on small caps, so to juice the market up (and down) 8% is easy peasy.
UPDATE3: ZeroHedge.com could not say it any better:
Source: Charting Nine Days Of Short Squeezes And Vapor Volume
Said otherwise: shorts panic -> weak hands cover -> market follows. Naturally, for this to work, volume has to be well below average, which was indeed the case - the volume has been abysmally low for the duration of the entire melt up which means the second there are no incremental weak hands to short, and the movement flips, most likely on the fully priced in deus ex bail out of Europe which will not happen next week or ever, massive volume will return, and the market will do what it always does in such situations: soar inversely.
UPDATE4: Please review this post Revisiting the 1937-1942 Analog
COMMENTS: All we can say, please read the post named Seven SP500 bear market trades that won .
We are excited for future profits out this market !
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.."Successful tape reading is a study of force. It requires the ability to judge which side has the greatest of pulling power and one must have the courage to go with that side"..
Richard D Wyckoff
.."A market is the combined behavior of thousands of people responding to information, misinformation and whim"..
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