Monday Evening  23 August 2010

     The remaining short position from 1093 was stopped out at 1072, during the Sunday evening session.
Now on the sidelines, we are looking for a weak rally to sell.  Today could have been it, but if so, it was
too brief upon which to act.

 The smaller bar on Friday, following a more negative wide-range bar with a weak close from Thursday, managed to close about unchanged.  The obvious question is, what happened to the follow-through? 
Why didn't sellers continue their dominance and break the will of buyer's efforts?  The lower volume shows that sellers, for whatever reason, did not act when it was opportune. 

 It was for this reason we lowered our protective buy stop to 1072.  The activity looked like a reaction
wave to the upside could begin today, Monday, and it did...for about an hour.  Another observation
that prompted a more cautious posture was the lessening of the downward thrust.  The low of Friday
was not much lower than the last swing low, 4 bars earlier.  Compare the difference between those two
lows with the low from 4 bars earlier to the one 6 bars prior to it.  The downward momentum had just
about stopped.  Why?  Sellers were on a roll.

 We drew a support line off the Friday low, for it has not yet been violated, and by Tuesday's open,
that point may be moot.  However, a slight case can be made for it holding, at least for a few days, and
here is why.  Well, we gave most of the reasons why, already. 

  This is the "last hope" reason why price could hold a bit.  Expecting a rally after Friday's smaller range
and almost unchanged close, we indicated on the chart Monday's activity was a higher high and a
higher low, but the close was a little lower.  The lower close on an otherwise up bar could be a message
from the market that the weakness from Monday's close is telling us that Friday's low needs to be
retested, maybe even make another low, and then have a reaction rally.

 The analysis is not an exercise in rationalizing the need for a rally, but just taking both sides into
consideration in order to be prepared for a response.  Why be surprised?  Of course, the other side is
apparent...price on a precipice for an accelerated decline.

 If there is a holding of price at the current level, a rally to the 1085 area would be most interesting.  There
are a few resistance points with which to contend, and any weakness would be reason for initiating new
short positions.  Otherwise, we will have to sell a train that is already leaving the station.

 As always, the market has the final say.

au