Wednesday Evening  21 July 2010

 An editorial comment, first.  Our way of looking at the market, reading development of price and volume
activity, is technical analysis at its purest.  We cannot know the level of understanding of readers who
take the time to read these articles, but the numbers are increasing.  Regardless of the level of one's
technical background, it is worth taking the time to understand the points we make, for they are all
based on what the market is communicating.  When you begin to understand that the market has its
own language, it becomes apparent that there is concrete structure that makes sense.  It is not always
easy to read or uncover, but it is always there.

 What is true of the S & P, the market that gets the most coverage here, for now, is also true of individual
stocks, or wheat or soybeans, currencies, metals, etc.  Someone who only follows grains may not be
too interested in reading about the S&P, but what we convey are market principles, expressed in price
and volume, and principles are unchanging in any market.  On to the day's analysis...

 Just as we went to the sidelines after covering short positions, yesterday, we jumped right back in when
price stopped cold at a point of resistance.  Nothing is better than when the market advertises its intent.
That was apparent when price held at 1050 support on Tuesday, and it was equally true when price
stopped at a clear resistance level on Wednesday, around 1088.

 Not drawn, but there is a supply trend line coming off the April June highs, and that is where price
stalled last Tuesday, Wednesday, and Thursday, the three bars at 1100, just prior to Friday's wide
range down bar occurred, and extending the line further to include today's activity, the supply line
contained yet another rally attempt.

 Back up one step and keep in mind that Tuesday's wide range rally bar was more from short-covering
than it was from new demand buying.  That point alone says the character of that day's rally was not
strong.  When a "less than strong" rally goes into a resistance area, expect the resistance to be stronger
than the effort to reach it.  The details are better seen in the 60 minute chart because there were more
hurdles for buyers to overcome.

 It is understanding the context of the the past tense of market activity that influences present tense
development that leads to future results/direction.  Case in point.  In S & P - The Jury Is Still Out On This Rally, [click on http://bit.ly/aicSvL, 4th paragraph] where we drew attention to the clustering of closes
and how they can be turning points.  In the third paragraph, mention was also made of the lower volume
attendant with the rally, indicative of a lack of buyers.  Keep in mind, this developed right at the supply
trend line discussed above.

 Look at the wide range bar down on activity of the Friday the 16th, the same bar where we went short.
That was what is called a vertical supply bar...vertical because it is such an obvious wider range, volume
increases, and in this case, the close broke the low of the trading range...and supply because it is to the
downside.  A vertical demand bar would be one to the upside.  The high of that bar was 1089.  Look at
where price stopped on Wednesday's rally.  Right at the same price level.  The vertical supply bar high
acts as resistance, and it was.  It was also the the same resistance level from the supply trendline on
the daily. 

 From the start of the day session, the 8th bar from the end, price moved quickly away from resistance
and closed poorly, on increased volume.  Coupled with the previous observations, it was clear that the
market would not hold, and these are the reasons why another short position was initiated at 1080,
7th bar from the end. 

 For the next four hours, rally attempts were weak, unable to get above 1082.  Weak rallies lead to lower
prices, and in the next hour, the sellers stepped in on increased volume and the weight of the market
gave way.  This is an example of doing one's homework and being prepared to act, depending on HOW
present tense market activity developed.

 We took past tense activity, monitored how developing present tense activity unfolded, as just outlined,
and that led to future expectation of lower prices.  The market generated activity: price, the position of
closes, and volume is the most reliable source of information.

  All of this, and Friday's analysis, led to short positions due to present tense market activity.  What is not
as apparent is the fact that in both short positions, once in, price hardly moved against the position.  That
speaks to the quality of the information extracted, and acting on it at the right time.

 Short at 1084 for the above reasons.