TRADESTRONG MANAGEMENT

Crunch Time

While both the ES and the $VIX closed unched for the day, the bulls managed to keep the trade above the VWAP for the majority of the day. This was the 6th trading day since the swing low was made last Tuesday, and the first day the market didn't close higher. It was also notable for the lack of volume, which was lower than yesterday's, which was a bank holiday.

Nevertheless, The ES closed above it's 50EMA for the second consecutive day, and the $VIX , closed below it's 50EMA for 2nd straight day, also. Breadth was slightingly bullish, and as could be expected, it was an approximately 50% day on both exchanges. Of note, however, was the fact that new highs finally led new lows on the NYSE, as new lows led new highs on the NASDAQ. In total on both exchanges, new highs led new lows, 40-25.

Of greatest concern for the bulls, is the anemic volume, although some leadership appeared today, with the slight expansion in the number of stocks making new highs. A convincing FTD would confirm a continued rally, however it is most ideal for a FTD to come between day 4-7 of a new rally attempt - so time is running out.

Certainly, all the shorts who wanted to cover, have had their chance, so it is doubtful, whether there are any weak shorts left, that could continue to fuel the rally. Buying, in the form of new longs, is needed for a sustainable second leg of the rally.

Instead it is beginning to look a lot like price exhaustion. As TD said the other day, tops and bottoms are not made by selling and buying, but by an absence of buying and selling. The lack of volume the past 2 days is indicative of buying drying up, and a swing top.

Once again, the market is at a level, where it has rallied dramatically to before, and failed, just as dramatically. It appears that tomorrow (Day7), may be "crunch time" for the bulls, where a failure to rally on big volume, with emerging leadership, will spell the end.