Monday, August 18, 2014

6:03 AM

The NASDAQ Composite closed at 68.31% of its daily range while the VIX closed at 41.31% of its daily range. Both numbers tell us that the selling pressure which was ignited by the report of Ukrainian solders taking out part of a Russian convoy, turned out to be nothing but another shakeout of weak holders.

Buyers absorbed much of the selling after a strong open and left the Comp with was Hanging Man candle which means absolutely nothing unless we have a sharp down day. Ideally, a Hanging Man candle is confirmed with a lower open, which at this point in the trading day, does not look like it is going to happen because the futures are up sharply this morning.

If the Composite does break out of this trading range, it will be interesting to see if the breakout is on high volume which would be more of a confirming signal, but a market or stock can continue to go up if buyers continue to step up to absorb the selling, therefore the light volume is absorption volume. Heavy volume would tell us that more traders and institutions are participating, but if strong holders are content to hold onto their positions, there is little supply for sale, and if others want to purchase a stock, they have to pay up. It is the rule of supply and demand, if there is more demand than supply, prices will go up in spite of light volume.

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