The stock market has enjoyed a decent run up since the 4150's. When we try to determine what the cause of this significant rally was we turn to the #CFTC data for insight. When we examine the CoT report data we can see that the initial move from the lows was not caused by non-commercial trading as the positions tell us there was a decline in positions from 283k to 272k. We would have expected to see an increase. There could be several explanations for this rally which we won't go into now but I wanted to establish this before going further down this path.
So now we have to take a look at the charts for indications on what is taking place and what is it that we should be watching for. When examining the daily chart I have drawn in some arrows. These arrows represent the buying/selling and the amount of force i expect to see from these areas based on the thickness of the arrows. The thicker the arrow the more powerful the buying/selling.
As you can see in the 46k area I expect there to be some selling. Now we could enter this area next week or we could fall short of contacting it and price could just decline from the current 45k area. It's likely a push higher to contact the supply area will take place but we'll see. What's important to recognize is the buying area in the 44k area is not as powerful as the buying area in the 42k area. This will play an important role should price decline down to these areas from the 46k supply.
This supply/demand dynamics is what is currently in play meaning these buying/selling zones are what is driving this market at this time. I will be monitoring this chart heading into next week and I'd like you to pay attention to how the markets plays off these areas as well.
I'll be posting an update on this situation in the coming weeks.
