© David H. Weis [email protected] Tel 617.489.9155

When a market is in a downtrend, I do not like to constantly try to figure out if it

is ready for a rally. But today’s price action in the S&P strongly suggests prices will

indeed rally. The story jumps off the chart. When compared to the last six price

ranges (except for Monday’s muted session), today’s range is the smallest. Note

how the S&P closed near mid-range and only slightly lower on the day. Today’s

range is 43% of Wednesday’s range and yet their volumes are almost equal. This is

an important clue. It tells us the sellers made a large effort to break the market but

buying emerged. That’s why prices did not accelerate downward. The exact same

behavior occurred in reverse on October 17 (see arrow) where the up-range

narrowed and the volume was as heavy as on the previous two days’ up-moves.

On that day, the market encountered supply. Today it encountered demand. As for

how far the S&P will rally, pick a number. Certainly the 1363-1366 area

mentioned last night seems reasonable; however, I think the zone between 1386

(Tuesday’s high) and 1393.50 is more likely. Have a nice weeke