Since November/December 2010 when the market cleared the all important pyschological hurdle of the whole number (1200), the bulls have ignored any suggestion of being overbought and overextended. Trying to determine where the high resistance point lies and when the subsequent pull back will begin is like trying to determine when Kanye West’s next outrburst will occur…..you know it’s going to happen, you just dont when.
Looking at an hourly chart like an investigator, one can see clues that may be forming to give us Speculators a hint that the bears may be trying to make a case for control.
On January 18, 2011 the market (E-Mini S&P) marked a two-year high at 1295 and was subsequently met with some type of liquidation. I say “some type of liquidation” because the sell of was stealthy, but was rather oderly and did not present the look of a panic sell off. After selling off and touching on a near term low (1267.50) on January 20, 2011, the market staggered off those lows to touch 1288 (no significant point of interest as far as I can tell). At this point, 1288 is a distribution point and the market needs to trade above and most importantly close above 1288 on the hourly. The hourly chart (shown below) reflects a rejection bar at 1288 (21Jan), which signifies that there was no one willing to take the offer, therefore the liquidation, alebeit minor, resumed.
At this point, the bears have made their argument: 1295 and 1288 are the highs they are willing to accept; the burden of proof is now on the bulls to make their claim that they are still in control. The bulls must clear and close above these highs.