So ends day four of a low volume pullback. Although I often remove the volume bars from the charts I show on the site for clarity, I watch it carefully during the day and especially as I analyze the longer time frames.

The longer we go without some good volume on an up day, the more likely it is that we haven’t seen a real bottom yet. Today the market just confirmed its indecision with another sideways narrow-range day.

Pullback Mode
Using some pivots from yesterday, there is now a large rectangle pattern that some may be trading as we bounce from support and resistance. In the Russell I want a rectangle to have a span of at least five points before considering trading a range, and I also want a divergence as it reverses at the top or bottom. Today we got one of each.

We started the day by trying unsuccessfully to penetrate yesterday’s high. Without a divergence or a close moving average I didn’t consider a short sale there, or a purchase as we moved higher at 7:00 (Pacific.) But when we came back to test the earlier top there was a good range and a nice divergence.

The same setup occurred in the opposite direction about 11:30. I wouldn’t take that first bottom, because there was no divergence. But the market came back down for a second chance at entry, and this time the Stochastic was moving up nicely.

The longer a rectangle extends the more likely a breakout, so if Monday continues sideways I’ll require more confirmation before taking another ping-pong setup.

For non U.S. traders, remember the United States begins daylight savings time this weekend, several weeks ahead of the “normal” schedule.

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