Thursday, December 19, 2013

Watch the Volume At the Top- S&P 500 Price/Volume Heat Map Dec. 18

Yesterday's move in equities probably gave Bernanke a boost to his machismo, as it apparently validated the Fed's whole QE efforts. Following the fed announcement for a cut of $10 billion/month in QE, equity prices exploded, ultimately culminating in a total gain of about 1.7% in the S&P 500.

Yesterday's gain came on wide price spread and accelerated volume, in of itself suggesting that equity prices still have life in them. In another case of you probably do not need to look, the price/volume heat map reflects the price strength with demand higher across the board.

Looking ahead, I will be watching today's price action closely. Not only did the S&P 500 close near the highs of the day, a positive signal, but it also closed pretty much near/at the all-time high. This would mark the third time the S&P 500 retested the high water mark. If equity prices cannot push through this level it would suggest major selling resistance at this level. More so, the inability of equity prices to push through the high may be a tell in of itself. Additionally, I am unsure if yesterday's was wholly a bullish signal. Yes, the tapering action removed uncertainty, which traders abhor, but yesterday's action also looks like a regressive action. Remember,  the removal of the tapering uncertainty followed a trading environment where equity prices fell in the last four days out of five. We were bound for a snap-back and why not now. You should also note that the sector with the largest percentage gain was healthcare, gaining 2.5%. Healthcare stocks had taken it on the chin in the recent, shallow, four day pullback, and the large price gain in sector lends itself to the conclusion that yesterday's actions were a regressive move. Definitely a lot to watch in today's trading.

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