Today we sold off in the morning (not that surprising considering the ridiculously weak buy strength noted yesterday), but regained some ground by the afternoon.

By first appearances, one might conclude that today is remarkably similar to yesterday, but in the opposite direction.  Yesterday we had a .9% gain with no buying, and today we had a .85% loss with little selling.  This is a similarity, but the critical distinction is that while buying should accompany good volume, selling does NOT necessarily need to meet any volume threshold.  Strong volume on a buy day is important, but strong selling on a sell day is not, because price leads volume.

In an uptrend, low volume pullbacks are the best type.  The otherside of that coin is that low volume selling means few people threw in the towel, and the should prices comtinue to move lower, there is still a large remainder of people who have yet to cash out and may do so at signs of additional weakness.

Other things to be aware of is that this is the fourth consecutive month higher, and the second consecutive week lower.  In other words, it wouldn’t surprise me if we got a bounce in the context of a lower monthly close for July (June close is 919.)

Despite the index rising .9%, there was pitifully anemic buying and selling today.  What is surprising to me is not the lack of sell strength, but the apparent frugality of buyers.   A reading of 33 is very low for nearly a percent up, so there is clearly some breadth divergence going on here.  Index plods along, stocks themselves aren’t heavily bought = this should soon be resolved by a color change in price.

One possible cause was Friday’s Russell rebalance, but given the numerous measurements this indicator is making it is not likely that that event was the sole contributing force to Friday’s unsual strength or today’s unusual weakness.  If the market continues to run we could get a push towards 963-975 in the next two weeks, however, should we take out 880, we will probably at least test 830-850.

On another note, chalk up Friday’s post “…Extremely Unusual Action” as a win, 16:19.  As I made clear, though the trade was “high probability” I would trade it per se, but did influece my decision making today, especially since after about 10 AM EST is was worse than watching the paint flake off of an abandoned Riverside row house.

Nice little pop this morning, but butting heads with some resistance around 922.  Let’s see how it pans out.

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Next resistance areas to the upside are 935 and 947, and support on the downside at 899, 892, 881, and 864.

Friday was an interesting day.

{I would right-click and open the pictures in a new tab so you don’t keep having to press “back” to get back to the original post.

What’s interesting about it is that there was strong buy strength, even though the day ended negative.  It is extremely unusual to see a doji day with such large strength.  I double checked for any times that the S&P’s percentage change was less than .25% and there was buying of at least 2x the standard deviation mean and found it is quite rare, occurring 18 times in the last 2600 trading days or .69% of the time.

The results from going long at the close of the doji day and selling at the next close:

Not enough trades over 10 years to make it worth it, but it does have a high win rate.