Failure to take out the all time high at 1846.50 resulted in the market breaking hard last week. Wednesday was an inside day - a formation referred to as Balance within Balance. Thursday, the market gapped lower from this 2-day balance. A gap is a form of Excess. Excess marks the end of one auction and the beginning of another. Friday saw the market break out of a 4-week balance and enter the lower weekly balance between 1765-1807. While the monthly trend is still up, the intermediate term trend has turned to the downside. Friday's close at 1782 - was on the lows. Acceptance within this lower weekly balance area targets the balance area low at 1765-68. While there is still a lot of structural repair that is needed below these levels - all the way down to 1700, I would take it one step at a time. Both Thursday's and Friday's sell off was not accompanied by extreme NYSE TICK readings. However, Friday's NYSE Volume was above recent averages at 4.4 Billion. Some information to carry forward -
- Both the Nasdaq and Russell index made new all time highs in the overnight trade coming into Thursday's pit session. It is unusual for markets to make leg highs in the overnight session.
- A poor high and a very prominent POC (1839.25) from Wed, Jan 22, 2014.
Lets look at the Profiles next. I view Friday as a triple distribution day and treat each distribution as a "separate" day even though they were formed on the same day. For Monday, if we get overlapping to lower Value relative to Distribution 3, it shows that the auction is not complete to the downside. The odds of then reaching the 1765-68 area increase. If we open within Distribution 3 and enter and find acceptance within Distribution 2 - the target becomes the 1805 area which is also close to the high of this lower weekly balance area shown in the bar chart above. So, take it one step at a time and reassess based on the overnight inventory conditions coming into Monday's pit session.
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