Thursday Evening  12 August 2010

 We are strong advocates of knowing the trend as the first consideration in taking a position.  The trend is
an indication of directional market momentum.   The daily trend has been down since the April high, but
within the downtrend, price has been in a sideways trading range defined by the 1130 area on the high
side to 1002 on the low side.

 The market has provided us with important information over the past week.  1130 is very strong
resistance, and that was confirmed by Wednesday's large decline with ease of movement lower.  It
can now be said that the trend within the trading range is decidedly down, and that information makes
decision-making easier...trade only in the direction of the trend.

 Thursday's low reached a somewhat oversold condition, just above 1070.  One clue about being a bit
oversold is the smaller range.  Sellers were unable to extend the range even lower, but after a near 60
point break, that is understandable.   This does not mean buyers were present near the lows.  The open
was near the high of the day session, and the close was under that opening and just about mid-range.

Not shown is a weekly chart, but unless there is a dramatic rally similar to Wednesday's decline, it will
have a very negative price position.

 The weakness is more apparent on the 60 minute chart.  After two strong volume bars, [the two green
bars starting at the day's low], price was unable to mount any rally above the 1085 area.  This is a weak
responsive buying effort, some of which was short-covering, and it typifies and confirms the character of
a weak market when a trend is down.  If this is the best that could be "accomplished" in five hours of
effort, it tells us that any kind of reaction rally over the next few days can be a selling opportunity.

 Now, we do not have to "predict" what may happen.  Instead, all we need do is monitor developing
market activity, and when we see some kind of turning point on a rally, it will be our signal to add to any
short position, or initiate a new one for anyone not yet short.  There is no guesswork involved.  It is
simply a matter of knowing the underlying market conditions and reacting accordingly.

 Sounds like a plan.