What a fight! Who will win? The Bullls? or The Bears?
For the entire day, the SPX treaded water in a tight range of between 1362.06 and 1366.97. It closed yesterday at 1365.96. More remarkable is the breadth in NYSE. There was such a fight between the bulls who refuse to give up an inch and the bears who refuse to submit to the bulls. See the advance-decline volume chart below and you’ll probably understand.
The green/red candle sticks are advancing volume while the purple candle sticks are declining volume. Look at how close they are! They are almost the same line! Alright, so what does that mean? This basicaly gives us a good “under the hood” picture of what’s going on in the market. What today’s chart tells us is that the bulls and bears are equally strong: for every buyer out there, there is a seller. They are in equilibrium so to speak. But this information has to be analyzed with respect to the bigger picture.
The bulls have been steadily rising since 12 Sep. SPX has been trending up steadily in an uptrend channel. The best the bears can do happened 2 days ago, and it was a measly effort. The SPX dropped by a mere 5 points! That seems to be the best the bears can do!
In this context, the bulls are relatively stronger. Even though SPX is over-extended, it doesn’t have to come down simply because it hasn’t. SPX can choose to correct by time and be trading in a tight range. Honestly, I have no idea where it’ll go. The risk is high on both sides of the market. We’ll wait for a clear trend to develop before initiating any new positions.
Tomorrow is options expiry day. Do remember to check your ITM options to avoid any assignment issues.
good trading!
gary
