On Friday, volatility contracted and the market traded inside the range of the previous bar. Contraction in trading activity like this often leads to a jump in trading activity in the following day or two. Often, we can see a strong, one-sided day. The market is also sitting on top of the 1208.50 support level from November 1st. We can expect to see it move away from this level soon, and because of the low volatility on Friday, it can move swiftly.
Supply appears to have been dominate since the first of the month, but we have also seen buying step in and hold the market up all month, as well. So it is vital to keep an open mind. If the market does move swiftly tomorrow, we want to be able to go with it in whatever direction it travels, not be fighting it because of a market bias.
Watch the key levels closely tomorrow morning. If trading breaks down below Thursday’s low (1206.50) during the early part of tomorrow’s trading session, watch for further downside progress. If price rallies early and holds above Friday’s high (1229.75) look for a strong move up. Keep an eye on the volume and also the market internals to give you a clue as to whether the market is trading with increased activity and a trend day is in the making.
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