Wednesday, December 7, 2011
The SPYs price action over the last five days explains my concern about its supposed "break-out" from a consolidation pattern. Prices gapped higher and then moved higher for 2 and a half days. Prices broke trend on the third day of the rally and have been consolidating for the last two days between 125.5 and 127. While prices are still above the 200 minute EMA, this is a rally whose steam is running out.
Ideally, when prices break out from a consolidation pattern, we'd like to see long bars on high volume. Here we have the exact opposite -- weak bars on low volume. In addition,
We see the same pattern play out in the other averages -- prices broke out but did so on low volume. In addition, none of the bars are green, indicating prices closed higher at the close. As break-outs go, these are really terrible.