BarroMetrics Views: The S&P 2009-06-01 II

BarroMetrics Views: The S&P 2009-06-01

I said yesterday that if we saw a bullish move yesterday, I’d review the S&P today.

When the market open-gapped yesterday, I lowered the stop on my shorts to just above the opening 60-minute high. The resulting stop-out cost me about 0.75% after including the results of the two prior open-gap trades. I did not reinstate my shorts because I wanted to see what the market would do today.

Figure 1 is the normalised volume. It shows:

  1. Larger volume yesterday than the proceeding up days BUT
  2. Still below average
  3. And still showing divergence with the bar of May 05.

Points (2) and (3) above are bearish.

In addition, the Market Delta for yesterday is also bearish (Figure 2). While the total volume went up, the Delta dropped.  The lack of selling Delta shows that while we are attracting some responsive sellers, we are not seeing them in size. On the other hand, the declining buying Delta indicates the buyers are starting to lose interest at these prices. Overall I consider the Delta for yesterday bearish.

The bullish counter point is shown in Figure 3: we see little signs of a rejection selling extreme (upper shadow) on yesterday’s bar basis cash. The futures chart is a little different but in this context, I prefer to rely on the cash chart.

For today, I think we may have a double top or a slightly higher high that is followed by a retracement.  And, I am eagerly awaiting the next couple of daily down bars: they will indicate the quality of the next down leg.

An increase in range and selling volume will suggest a tradable top is in; a below average range and volume pullback will suggest more upside.

The combined Market Profile, Figure 4, shows that the key level is 926.00. Acceptance below that augurs a move to 906 to 909.50. If the S&P can develop at or above 926.00, we’ll probably see more upside.

Stay tuned!

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FIGURE 1  Normalised Volume

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FIGURE 2 Market Delta

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FIGURE 3 S&P Candlestick

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FIGURE 4 Market Profile

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