Wednesday, January 13, 2010

Midday Briefing for January 13th

We can see how we broke below the overnight range in early trade today, but then vaulted right back into that range. In the process, we held above that key 1127 area noted earlier as support. When prices rebound that strongly from a range break, it represents a rejection of those lower prices, as buyers at a longer time frame identify those levels as representing unusual bargains. Often those returns to the lower end of the trading range will end up traversing the entire range, as shorts are caught and need to cover, adding to the upmove.

Today's move was aided by an unusual surge of volume around the 1137 resistance area noted in the morning briefing. Apparently someone was gunning for a break of that level; if the upside break is legit, we would expect now for that level to hold as support. All of this is consistent with the range bound thesis advanced this morning, as lower prices in the bull market (so far) find willing buyers.


Hernan said...

Speaking of that 1137 level. Note the volume traded. Is impressive, 150k + Net long in two prices!!!. What is this mean?, how is it possible?

Michele said...

Having failed to break yesterday's lows, and indeed having retraced all of yesterday's loss in one day (a bullish sign), I don't see any resistance between here (1145) and 1209. That is the level it was at in October 2008 just before falling off the cliff.

Everyone who didn't get out back then and has been waiting patiently ever since will finally be getting back to even and then heading for the exits, thankful and relieved just to have finally made up their gut-wrenching losses from late 08 through March 09.

Interestingly, if you take the rising trend line from the March 09 lows and start a Fibonacci time series (if you believe that stuff) at the same spot, the trend line intersects the 1.618 line real close to 1209, around the middle of next month. FWIW.