Wednesday Evening  18 November 2009

 "Sellers!  Sellers!  Wherefore art thou?" ...in this mini-drama series of "Who's On First?"  Buyers have the
edge by virtue of the trend, but they are not very strong.  Sadly, sellers are even weaker.  Doesn't anyone
want to take control?

Once again, to best answer what is going on, let us examine our favorite, most important piece of
market information, the Trend!  We talk about it in almost every article, and with good reason.  When
you can identify the trend, you know in which direction your trading effort extends,  if you want to be
efficient and consistently profitable, on balance.

We talked about comparing the trend in different time frames earlier today in a follow-up article on the
Natural Gas trade from yesterday, Natural Gas - Follow-Up.  Some of our topic articles are more widely
read than others.  We trade opportunities, not specific markets.  When we write an article about
Natural Gas, we talk about technique, for we do not even know the first thing about Natural Gas, not
even the contract size.  If one wants to learn how to trade, trade opportunities.  The market, any market,
is just the means.  The point is, we provide pertinent information in each article that applies to any
market, Natural Gas, Wheat, S & P, et al, so do not let a particular market seem of no concern because it
is not your area of interest.  A chart is a chart, to echo a familiar refrain.

Back to the drama at hand.  The daily trend in the S&P market can be called up, and we would not stand
in the way of anyone wanting to argue sideways, or no trend.  Moot issue at this point.  Examing the
intra day, 60 minute chart below, the parallel lines are a channel drawn from the daily chart activity.  Note
how the current price location has not even come close to approaching the upper level of the trading
channel.  This indicates a tired, weakened market.  Not one to short, but maybe move up stops on longs,
if long, at all.  [We are not.]

At the beginning of November, price even penetrated the bottom support channel line, briefly.  We have
already addressed the quality of the market condition in yesterday's popular article about the S & P.
 S & P - A Picture Worth A Thousand Words , so we will press on to other areas for further examination.

The "Resistance" on the chart points to the primary supply channel line above, and also to a new line
drawn across the September and October highs.  When a market fails to reach its established upper
resistance line, it is a message from the market, as we said, a weakening of the trend.  We drew that
second line to reflect the lower boundary of the advancing market, loosely speaking because the
"advance" is more of a crawl.  What becomes apparent to the discerning eye is that price is struggling
to reach even that line in making new highs within the current rally.

The third line, a horizontal one from the October high, shows how price is barely staying above the
previous swing high.  The daily ranges from Tuesday and Wednesday are small, reflective of a lack of
demand and an absence of sellers.  Buyers retain the edge because the closes are at the upper end
of both bars, so whatever anemic selling there is is being absorbed by weak buying efforts.  It is
exactly this kind of poor performance that sellers will take note of and decide the time may be ripe to
step up to the opportunity...something sellers have utterly failed to do, so far.

Volume, noted by the down-sloping line, continues to drop as price continues to rally, an incongruity
that cannot persist for much longer.  Either buyers will come into the market in force, or sellers will. 
That  is how markets function.  Any market, at any time.  [Unless there is a balance between the
opposing forces and a trading range exists.]

It should be pointed out that the monthly trend, not spoken of much, and hardly ever considered by the
majority of traders, that trend is still down.  Let us draw that time frame into the discussion because it
appears it may have bearing on present tense market activity.  [Know the trend in which you are trading,
and know the next higher time frame trend, as well.]  To that, add an occasional peak to the larger time
frames, like the monthly, and four times a year, the quarterly.  They are very important.

Consider, the October 2007 monthly high was 1586.  The March 2009 low was 665.  The difference
between them is 921 points.  Half of that is 460, added to the low of 665 = 1125.  Hmmm.  Isn't the
recent high 1112, and struggling?  Absolutely!  Sometimes the rules of horsehoes apply in trading.

Going back to the excercise above about a market failing to reach the upper channel trendline as a sign
of weakness, 50% of any range is a good guide to gauge the strength or weakness of a rally or decline.
If a rally is unable to go above a 50% area, it shows inherent, relative weakness.  In the instant, the
daily chart is struggling to get above the October highs, and limped to the recent 1112 high, just under
the monthly 50% retracement area.  Price is struggling on the daily and falling short on the monthly.

As in individuals, markets also have character, and as we read the messages the market is delivering,
the current character of the S & P market is not very strong.  Markets recognize opportunity and will act
on them, evidence to the contrary in this case.  Not even the S& P can defy gravity.  It may very well be
that political influences are keeping professional sellers at bay, until year end, which is simply prolonging
the agony and exacerbating the inevitable, but results will show up, eventually, and this is a warning
to not be lulled onto the rocks by the siren call of a tired bull market.  It is okay to miss the last 10-15%
of a move.  The risks of reversal are greater.  [Think October 2007.]

The dollar weighs on the monds of most market participants, and as long as it is allowed to flounder at
its current lows, other markets are biding time.  That is what the tape seems to be saying.

Who are we to argue? 

There are no reasons to be short, at least not yet.    Caveat emptor.