It is time for our weekly review of what actually happened in the market last week. Last week, in our blog for the weekly update, we informed everyone that the $SPX, weekly chart showed an increase in buying volume on a down price bar. Last week the closing price was at 1,433.19. Furthermore, we indicated that price could find resistance around 1,397.37. This week the closing price was at 1,411.94, which is close to the THD ATR (*) on a down price bar and with selling volume which is near to the above mentioned support level.
At this juncture the possibilities are that it could bounce. However I would be paying close attention to the smaller timeframe to see potential volume divergence and trend direction. If price breaks this support level the next support area is located at 1,317.75 where the THD MA (*) is located.
On the monthly chart, if you follow the green lines, you can see the volume divergence. It is important to keep an eye on this one chart because, if the divergence plays out, a considerable pull back can be expected. Unless the bulls comeback into the market with strong volume I do not see how this can go up. Take note that we are almost at the end of October and volume has about dried up!
On the $INDU (DOW), the weekly new low was set at 13,039.86, before it bounced backup and closed for the week at 13,107.21. Price touched THD ATR (*), blue cross below the price. The selling volume for the week was at 3,683.743.00 (see the yellow arrow above the red volume bar for reference). We have same situation as the $SPX, either bullish volume begins to show up or otherwise it may break current support. The next resistance is set at 12,485.79 where the THD MA (*) is located.
On the $INDU (DOW), the monthly chart it is worth seeing the white arrow below which is right above the blue dot on the THD RSI (*). In my opinion this is a significant resistance point and along with it the volume divergence indicated by the green lines is further indication that any long positions at this point are considered risky.
If anyone followed my last week comments on $COMPX (NASDAQ), you can see that this week’s move could be a continuation to the downside supported by strong bearish volume. At the moment the next supporting level is the THD MA (*) at 2,814.55 and if it breaks this area and continues down the next level of support is where the THD SR (*) yellow dot are placed. This level coincides with the last pivot low (blue dot) around the 2,726 area.
On the monthly chart the situation remains the same and is consistent with the other indexes same timeframe. Volume divergence with $COMPX is also indicative that any potential move for long positions at the moment needs to be supported by strong volume with UP (bullish) bars. Check the intermediate charts for market direction.
Again, we encourage all of you that are option and stock traders to use this methodology to gauge market direction. Any position that you make must be supported by the overall market and you must manage accordingly.
See you next week as I will post the weekly and monthly outlook for the markets.
(*) These are THD indicators. If you want to know more about these tools please visit the THD website for more information.