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17/05/17

22:27

Post #: 24755598
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Originally posted by redbacka ↑

Wednesday Evening Thoughts. 17 March, 2017.

XJO down heavily today -1.1%. Volume us up on the past couple of days (that's normal for a Wednesday), but overall volume is very low. This suggests that weak longs are bailing out, allowing for the sellers to capitalise. Such a situation is usually short-lived.

Here's the XJO chart.

View attachment 581694

Here's the Volume chart from the end of February:

View attachment 581691

The question now is: Has enough selling occurred for strong bulls to take control again?

Here's the On Balance Volume Chart:

View attachment 581688

This is an old-fashioned metric rarely mentioned these days. It is, however, one that I put a lot of faith in. Short-term this is rising while the stock chart is falling.

It peaked at the same time as the XJO, i.e., 1/05/17. It bottomed, however, on 5/05/17. Since then, XJO has continued falling while OBV has been in an uptrend. That positive divergence suggests that strong bulls are quietly accumulating stock while the market falls.

In that case, all we have to do is wait for a strong upside move. Then we know that the pull-back is over and strong bulls are showing their hand.

It's possible to see more selling. But there's not much more in it.

RB.

Expand

The SPX if it indeed corrects from here could last through to the week of the 19 jun inclusive. It will be a three or five wave structure down. Have not done the fibs on this may do so tonight.

May the odds be in your favour.

XJO Value at posting: 5,786.0
1 Upvote

0 Great analysis

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