Tuesday, February 23, 2010

Price Rarely Tells the Whole Story

The early afternoon tweet a little after 1 PM CT noted that the ES lows at that time (left blue arrow above) were not accompanied by lows in either the Russell 2000 or NASDAQ 100 Indexes. Most of the ES weakness was a function of weak prices among financial shares; other sectors did not confirm the ES lows.

In such situations, the downside is losing participation even as we reach price lows. When that happens, the seeming downside break often becomes a false breakout, trapping shorts. Note how that occurred this afternoon, with the two volume bulges (at right) as natural price targets to the upside.

It's a nice example of how it's important to monitor the context of price moves: price rarely tells the whole story.



Daniel said...

--As you always say, LISTENING to the Market, so one gets a fuller sense of the "whole story" it's trying to tell.

Checking for dissonant notes, non-confirmations; or elements moving into greater consonance and harmony. Volatility and volume; accel. or deceleration of an existing trend, etc.

To me it is still speaking, or perhaps even 'singing', of interm. term sidewaysness.


TD said...

After the 10 AM number, there was never a real pick-up in volume on the probes lower. The market definitely didn't have a liquidation feel to it (unlike Feb 4).