Today’s Market Action–Surprising?
The market action this morning may have surprised some traders. We saw the market start to rally strongly after putting in the January 6th low. I had emails from more than one trader saying that this rally looks very similar to the push off the mid-December swing low. They argued for new highs. I have been doubtful about that.
A few things seem obvious: (1) the strong rally off the mid-December lows barely made new highs and did so on no demand with volume receding on the rally, followed by (2) a new downdraft with volume expanding to the downside, and (3) the last two rally days have been on comparatively lighter, receding volume than mid-December.
Today’s Market Action Resistance Area
Last night in Deep Practice, I again expressed this view and the reasons behind it, including higher time frame considerations. We discussed the potential for today’s trading and I noted that the area just above yesterday’s high (red box) could prove problematic for the market. This is where the supply from the last downdraft began to pick up steam. If the market is subject to another round of selling, this was a likely spot for sellers to rekindle their efforts.
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