Late Selling Yesterday Hiding Bullish Structure? June 23, 2011

[Billy]

Forum Clusters 110623.xlsx

If the FOMC statements certainly seems to have disappointed or given a pretext to a group of large players who were quick to sell heading into the close, the -46.6 % drop for the intraday 20 DMF was only 1/5th of Tuesday’s extremely strong thrust of over +225%. So far, 80% of large players are keeping a buying stance since Tuesday’s open.
When starting my stage analysis routine, I feared a disastrous intraday stage structure at the close as a proof of “smart” money fleeing the market. I found quite the contrary, with a neutral intraday score and no selling pressure similar to early June to be found whatsoever at the close.



Turning to the daily stage structure, I only saw a moderate retracement in the percentage of stocks in strong decline and they were 21.5% coming from Friday’s close percentage of 36% and Tuesday’s close percentage of 18.5%. Here too, the selling pressure trend keeps declining strongly, while accumulation remains absent. To me it feels more neutral than anything else and any strong up day from here could easily reverse the overall market trend to the upside. Renewed strong down days are likely to do less damage than in the prior selling wave as the market is now clearly in a medium to weakening decline sub-stage, preceding accumulation.



For IWM and GDX, the clusters and buy signals are fairly neutral too.
IWM closed right above its 3-day VWAP (79.98 blue line), so collective buyers and sellers are all at break-even for the week. Interestingly, this equilibrium point is very near today’s robot limit entry of 79.94. Remember that if large professional buyers are waiting in ambush, they will take advantage of any drop below the intra-week VWAP to improve their own account’s VWAPs. Once again, I see no reason to worry as long as IWM trades and closes above QS1 (79.32) which is an important position size increase level for market makers.



For GDX, yearly pivot (55.19) and WR2 (55.32) were the reversal levels as expected. The second cluster resistance is more than enough to discourage any serious multi-pivots analyst, but I understand that no such analyst ever trades GDX. This instrument is the most erratic ETF I know, and you’re much better at listening to Pascal than to me to gauge the outlook for such an emotional and irrational behavior. Today’s limit buy point of 54.57 is near yesterday’s close and you must accept the risk of the stop far away at 51.23 on a neutral signal
Billy

[slgerritz]

The market gapped lower today. The prices for both GDX and IWM are now lower than the entry prices indicated by the robots. Should I buy the dip or has the dynamic changed?
Steve

Attachment 8976

If the FOMC statements certainly seems to have disappointed or given a pretext to a group of large players who were quick to sell heading into the close, the -46.6 % drop for the intraday 20 DMF was only 1/5th of Tuesday’s extremely strong thrust of over +225%. So far, 80% of large players are keeping a buying stance since Tuesday’s open.
When starting my stage analysis routine, I feared a disastrous intraday stage structure at the close as a proof of “smart” money fleeing the market. I found quite the contrary, with a neutral intraday score and no selling pressure similar to early June to be found whatsoever at the close.

Attachment 8974

Turning to the daily stage structure, I only saw a moderate retracement in the percentage of stocks in strong decline and they were 21.5% coming from Friday’s close percentage of 36% and Tuesday’s close percentage of 18.5%. Here too, the selling pressure trend keeps declining strongly, while accumulation remains absent. To me it feels more neutral than anything else and any strong up day from here could easily reverse the overall market trend to the upside. Renewed strong down days are likely to do less damage than in the prior selling wave as the market is now clearly in a medium to weakening decline sub-stage, preceding accumulation.

Attachment 8975

For IWM and GDX, the clusters and buy signals are fairly neutral too.
IWM closed right above its 3-day VWAP (79.98 blue line), so collective buyers and sellers are all at break-even for the week. Interestingly, this equilibrium point is very near today’s robot limit entry of 79.94. Remember that if large professional buyers are waiting in ambush, they will take advantage of any drop below the intra-week VWAP to improve their own account’s VWAPs. Once again, I see no reason to worry as long as IWM trades and closes above QS1 (79.32) which is an important position size increase level for market makers.

Attachment 8972

For GDX, yearly pivot (55.19) and WR2 (55.32) were the reversal levels as expected. The second cluster resistance is more than enough to discourage any serious multi-pivots analyst, but I understand that no such analyst ever trades GDX. This instrument is the most erratic ETF I know, and you’re much better at listening to Pascal than to me to gauge the outlook for such an emotional and irrational behavior. Today’s limit buy point of 54.57 is near yesterday’s close and you must accept the risk of the stop far away at 51.23 on a neutral signal
Billy

Attachment 8973

[Billy]

The market gapped lower today. The prices for both GDX and IWM are now lower than the entry prices indicated by the robots. Should I buy the dip or has the dynamic changed?
Steve

Steve, see Pascal's reply to a similar question:

http://www.effectivevolume.com/showt...ts-for-June-22

Billy

[barbados11]

Billy,

I just wanted to say that, as I mentioned in a previous post, I only recently began reading your posts and Pascal's again with great interest. I had not for months. I want to repeat that I find this work excellent, educational and very interesting. I particularly like how you continue to explain the positions within the changing surroundings and how details are developing regardless of how the trade is going. Today's comments are a great example. I plan on using this to trade soon but have not yet as I did not have a comfort level with the robots. I am now getting it.

Best regards to you both,

Pablo