Dow Jones Industrial Average rallied strongly in response to news of a European rescue by major central banks. Sharp rallies are typical of shorts covering in a bear market. Strong volume indicates resistance — if you look back over the last few months (ignore triple-witching at [W]) volume above 200 million normally precedes a reversal. Expect selling pressure at 12000 to 12300, leading to a reversal. Breakout above 12300 is unlikely but would be a strong bull signal, indicating that buyers have overcome resistance.
the only thing that happened yesterday is that now even central banks want to show to all the markets that everything is ok., but the opposite is true. Due to the exponential grow of interest and compound interest nobody is able to pay back the debts. The trouble with iran is another maneuver to attract world attention from the collaps of financial markets and to get a physical underlying for the worldwide exponental USD supply. So we have tanks, bombs, aircrafts and so on as goods and if iran is going to change government so much space for foreign investors. Since the huge amount of money has to be invested, who cares what kind of physical underlying we have. Yesterday for me it was an official acknowledgement that the financial situation is getting wore. We have bought only a little more time until the inevitable meltdown comes over us.
“Strong volume indicates resistance”
Yes, that’s it. It’s simple and logical, nevertheless often ignored.
Thank’s for remembering that.
Support and resistance are cited in every TA books. My observations is that the concept is scoring very poorly and giving the readers a faluse sense of security. Case in point…the Dow went through 1160 as if there was no support or resistance level at all. How much confidence do you have on other support and resistance levels?
Support and resistance are not inviolate, they merely increase the probability of a reversal. At times they are simply overrun by strong market sentiment.
Take the Quiz.
1. Did the U.S. financial markets get to the very brink (days if not hours) of outright collapse in early 2009?
2. Did it, in fact, collapse?
3. Is the European financial crisis as close to the brink as was ours in 2009…i.e. within days of outright collapse?
4. Did the U.S. markets rally 100% off their lows and have they held about a 75% gain?
Answer Key:
1. Yes
2. No
3. No
4. Yes
Anyone asking “What’s your point?” nees to turn in his/her Dick Tracy Trader’s Badge.
(-:
Jim
1. Yes, but (*)
2. No
3. No
4. Yes, is posible, & the alternative: Chain-defaults, unlikely, but possible (not a black swan)
——
(*) we are now in early 2009, but is january-09, not yet 09-march-2009.
Wait the Greek explosion (very near, perhaps weeks or days), account of the corpses, and observe the effect spread to Italy and Spain, and then I will be veru bullish, for the fase.4.
But from below yet.