Tuesday Aug 22, 2017
Well, just another hoo humm Friday and week last week as the trump admin for the 3rd straight Friday showed its final member of its original higher management staff (outside of VP Pence) the door! The indexes reaction was more of a follow through from its all time high of 2490.19 retrace to the 3rd cross trend in its current yearly range of 1991.77-2490.19 range then anything else as the index in the midst of its true “dog days of summer” saw less then 1/3 the normal average weekly volume as it fell to find a low last Friday ahead of Bannon news of 2417.75. Yes, it lost 2438.75 weekly support and its 50 MA in the process but it held its key level of 2407.70 the current daily 8.7 yr bull market uptrend in the process. That carried has now carried over to this weeks first two sessions as the index not only got back up and through last weeks 2438 former support/resistance but close over buy cross trend 4 at 2452.01 at 2452.51 today as it saw its biggest 1 day volume of the month and enjoyed its 2nd biggest 1 day percentage gain of 2017!
Before, the 38% of those of you that still support trump and his admin that thus far has more resembled as episode of “Seinfeld” (the do nothing admin) or “Surovior” as Steve Bannon became the latest causality of the tribe speaking and being kicked off the island and give trump’s sober professional 100% follow the tele promoter speech last night credit for the rally today and close over key 2452 today. Remember, it’s still August and the dog days of summer and the index is still trading off of its better then expected 2017 QE2 EPS releases then anything the GOP3 does or (and it’s done a lot of this so far in 2017) NOTHING!
Of course trump managing to retrain himself last night and not go off the rails deep into the weeds allowed the index to take a breather from what has been daily trump drama today, but today’s rally was more about those that try and trade the daily noise of the market in its ranges that got swept away last Friday on the indexes loss of 2438 then anything else. Because, my all time favorite market saying in all my years of watching the S&P 500 ($SPX) rang loud and clear “YOU CAN’T HIDE VOLUME!” Meaning, that Econ 101 with its supply and demand principles illustrates that ideology the best via its financial markets. Simply, that if there is little demand for a product (in this case equities aka stocks) and an abundance of supply then the prices must fall and vice versa if there is low supply and a high demand for a product prices must rise. However, what’s often lost in that economics 101 equation is substituting the two inside of each other also always applies. In otherwords a stock selling off and dropping big on increased volume is obviously extremely bearish because there a lot more sellers then buyers and thus the prices drops. However, what about if there is little selling (VOLUME) as the price drops? That is extremely BULLISH because why isn’t everyone selling if the prices are falling? “YOU CAN’T HID VOLUME!” Because, they know the drop is only short term and it actually represents another buying opportunity on weakness and that higher prices are coming! That’s exactly why the index recovered Friday at 2117 over 2405 and turned last weeks gloom into mooning today as it rocketed not only over 2438 but over 2452 by the close. But, what is perhaps even more BULLISH in the short term to get to our 2502 target we wet for the index on May 24, 2017 when it was sub 2160 was that the rise to 2490 earlier in the month with its fall on decreased volume to 217 low this past Friday as a result of doing it on less volume, it now doesn’t take average volume to take it higher because so many didn’t sell and since more have come in and short covering is about to ensue then an over extended range to accommodate those new buyers and those that refused to sell from 2490-2117 is now in place. Finally, it’s a simple equation now adding 12 to 2490 = 2502 and thus subtracting 12 from 2417=2105 to get to our 2502 target! In othewords hold 2405 by 12 then break 2490 by 12 and that of course equals 2502!
More to come….