Market Action Keeps Traders Glued to Their Computers All Week

Can you say: wide range bullish bar? I think you can . . .

That’s what the market said on Tuesday, as trading resumed after the long, Memorial Day weekend.

There had been some anxiety about Tuesday’s resumption of trading, after the market’s three day’s off. Many market observers have questioned how the rally can continue – given all the lingering, negative weight bearing down on it.

But the market is undaunted. At least for this week . . .

The four major indexes tracked for this column all experienced a sprint out of the gate on Tuesday, and ran with the bulls all day.

Wednesday brought a more somber mood as the market attempted to sell off some of Tuesday’s gains. However, some indexes sold off more than others.

Thursday worked out for the bulls. Again, not all indexes realized as the same degree of buying support.

Friday . . . what can I say about Friday? Wow! Gap up and sell off before most traders had gained their bearings. Sprint back, sell off. Rally back, sell off. Mount several more attempted rallies during the afternoon hours, gain some ground but sell off. Finally, in the last hour of trading, the bulls pull off a moon-shot! All indexes put in a wide-range, bullish bar to close the week on Friday.

Such drama! Such fear and greed! This week’s market action was more thrilling than several of the movies I’ve seen, lately.

If you recall last week’s column, the GMT (see sidebar on right) showed some weakening on the daily charts in the Micro-Trend. Last week, all but the Nasdaq had turned red in the Micro-Trend column.

This week, the GMT registers all four indexes as green (up-trend) through the Mid-term Trend. Only the Long-term trend remains down, on the daily GMT.

On the Weekly charts, the GMT is now showing all four indexes running green (up-trend) for both the Micro and Short-term trends. Last week’s GMT measured the Dow Industrial Index (Dow-30) to still be in a down-trend, in the short term.

The below, weekly chart of the S&P-500 index is a great visual of the consolidation taking place in the market.

Like last week, I’ve drawn blue lines to denote the support (lower blue line) and resistance (upper blue line). Take note of the four candlestick bars that have transacted within the blue lines over the last four weeks.

The first week above the lower blue line was bullish. That white candlestick bar is known as a wide-range, bullish bar. Buyers controlled the market, pushing prices higher.

The second week all but negated the first week. That second, red bar is known as a wide-range, bearish bar. The sellers controlled the market, driving prices down.

The third bar was also bearish – though a narrow body bar. Both the open for the day and the close were near the bottom of the day’s bar. The long tail, upward is evidence of the bloody battle between bulls and bears. The buyers pushed the price up, but the sellers tromped prices back down to close near the bottom of the day’s range.

The last bar, Friday’s bar, is another bullish bar. Again, the bulls (sellers) won the day – mounting a tremendous last-hour assault that resulted in Friday’s close being significantly higher than its open.

Here’s a better look at the multi-week fight between bulls and bears. The light green rectangle shows the daily, bar-by-bar struggle that is mostly masked by the compression in the above weekly chart. Why not take a look?

Inside that light green rectangle, take note to the other three lines I’ve drawn. There is a yellow line at the top and two green trend lines.

The yellow line represents the highest price achieved, to date, within the consolidation. That occurred on the Friday of the first week above the lower blue line (first wide-range bar in the above weekly chart).

Take note that the S&P-500 index has made two subsequent runs at that price. However, both have failed.

In week three, there was an attempt that was badly beaten back by the bears. Another attempt was made this last Friday, with the bulls’ last hour rally.

Also, note how I’ve connected two low points with an upward sloping green line. This denotes a higher low was made after a move up from the first low and a subsequent pullback.

Likewise with the upper, green trend-line. This line denotes a higher high.

Let’s do that same bar-by-bar count on the below, Nasdaq Composite daily chart . . .

Twelve bullish bars (white) inside the light-green rectangle, and twelve bearish bars (red) – a draw. Now if we count the white, bullish bar that occurred immediately to the left of the green rectangle, that would tip the count to the bulls.

Why didn’t I include that bar inside the green rectangle? Easy. It occurred on the Friday of the week prior. The green rectangle includes only those bars in which the whole week transacted within the consolidation zone.

Do note, however, that the Nasdaq beat the S&P-500 into the consolidation zone by a week (and a day).

Why may that be important? Compare the final week (final four bars) from the daily Nasdaq chart to the same period from the S&P-500 daily chart. Observe how the Nasdaq pushed higher on Monday and held prices at a higher point, relative to Monday’s wide-range bar, than did the S&P-500. There is relative strength in the Nasdaq Composite over the S&P-500.

Likewise on a weekly basis. The Nasdaq Composite entered its consolidation zone a week ahead of the S&P500. Again, that demonstrates relative strength.

Now for a pair of $10,000 questions: will the Nasdaq Composite be the first to break through the overhead resistance? If so, will the other indexes follow?

Buckle up for this coming week’s trading. It proves to be a continuation of this week’s heart-pounding drama.

Please Note: This article is an expression of my opinion. It’s meant to inform your thinking, not lead it. To be a mature investor/trader is to become educated – to think for one’s self. You are responsible to decide the best place for your money.

Always remember, any decision you make will put your money at risk – given that market conditions do change and the value of your investment will rise and fall based on those changing conditions.

Information presented herein was current at time of publication; however, change is inevitable. Data presented may have been overtaken by market events. Should you desire to act on information presented herein, always verify it against current market conditions.

I accept no responsibility for any loss or damage resulting directly or indirectly from the use of content in this article.

Disclosure: At the time of publication, I do not hold any positions in stocks mentioned in this article. I do reserve the right, however, to take a position at some future time.