Supply Demand

I have not been writing for the past three weeks. yet, there were no much action beside volatile side-way trading.

In my previous post (See the "Technical Analysis" post on October 30, 2011) I dragged your attention to the strong volume surge seen on October 26-27, 2011. I wrote: "There are high odds that such strong volume (strong action) may cause changes in the supply/demand balance. Now, the simple question is whether there are left enough bullish traders to support further up-move. If not, then we may see down-turn."

It looks like the stock market indeed made a change in supply/demand balance - as after strongly positive October we had mostly volatile side-way trading in November. However, now, the odds are changing again. The negative trading we saw past week has pushed many technical indicators, including money flow on longer-term charts from neutral readings into into the bearish condition. In addition major indexes (S&P 500, DJI and Russell 2000) are moving close to their lows seen on November 1, 2011. The Nasdaq 100 already had broke its lows and could be considered in the confirmed down-trend. The only relatively bullish thing, I could see at the current moment, is drop in the volatility. Yet, a strong drop in volatility is some cases is associated as a climax before strong price move (also referred to as the "silence before a storm").

We still have to keep our eyes on the Europe. Despite the Greece bailout promises there is still trouble in Italy, Spain, Ireland. In addition the "Bailout Money" have to come from somewhere... Another political point that may negatively affect the stock market trend is the "impotence" of the Congress.

Overall, I would say that the stock market longer-term sentiment could be considered bearish and so far I do not see strong technical indicators against it.

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