The reason I pointed out that particular area is because it was in a down trend and currently, so are we.
This is where Volume Spread Analysis starts to get a little more involved. It all depends on where "no demand" turns up(when I refer to "no demand", that's increasing SP with decreasing volume).
If "no demand" turns up in a down trend, we give it more weight, because of the weakness in the background. If "no demand" turns up in an up trend, we give it less weight, because of the background strength. In an up trend, you'll find that "no demand" will just knock the SP sideways at worst. In a down trend, sideways at best.
The periods of "no demand" between 2005 and 2007, AMJ'09 and JAS'10 we're in an up trend, therefore the "no demand" has just knocked the DJIA sideways. Shortly after, it has resumed it's up trend.
The period of March'09 to August'09 is very different. It has come straight after a "selling climax", which is a HUGE sign of strength. Look at the volume, it's massive! That's the sort of volume you need to stop a down move. As the sell orders are coming in, the pros are just buying everything in sight. Problem is, it's also full of selling. Therefore, in this particular period, especially around April, you need the volume to drop off for the DJIA to be able to move on and up. Not all high volume is good either. In fact, ultra high volume is mostly bad.
Have a look at the daily chart of BHP on the 11th of April. If you understood VSA, that day would've told you to reduce the majority of your holdings and the market was in for a fall.
I can just go on and on and explain the main principles of VSA and show you how accurate it is... but the wife has got dinner ready.
