THAT WAS THE WEEK THAT WAS

Welcome to our Newsletter for Friday 14th may 2010

MINI S&P500 DAILY CHART

Point A Thursday 6th May. As pointed out in our last week's Newsletter, this surely has to be a shakeout. Markets need these shakeouts when they are finding it difficult to make higher prices as seen above. The market zigzagged sideways for up to three weeks, unable to make progress, many bars having no demand indicating failure to make higher prices. A severe shakeout is what a market like that needs to get higher prices. We know it's a shakeout because of the massive down-bar, closing just above the middle on ultra-high volume. If that volume represented total selling, it would not have closed in the middle, it would have closed on the low. Point B Friday 7th May. Here we have another down-bar, again the volume is very high and again the market closed almost in the middle. This is basically a sign of strength now because look at that fairly narrow spread down-bar. What creates the narrow spread is professional money stepping in on the low points and buying, preventing lower prices and supporting the market. Note we've

drawn a horizontal line through the close of that bar (Point E). The reason we've done this is that you would normally expect the market to fall back down into that area at some time. If the volume is low, especially if the spreads are narrow, closing in the middle, this is a very powerful indication to expect higher prices. Of course the reason is the professional money has allowed the market to fall back down into an area where previously there was very high volume. Now the volume has dried up relatively speaking. If the spread is also narrow, this is a powerful indication that the market is going to rise, and the reason is because markets, without question, which we follow in VSA Wyckoff principles, show that if the market falls into an area where previously there was very high volume, the volume has now dried up, demand must be greater than the supply, so the market responds automatically to that by folowing the path of least resistance which is then up. You see this type of Wyckoff principle time after time in your charts. Point C We have an up blue bar, but look at that low volume. This is no demand. Professional money is not participating in higher prices. If they have withdrawn activity on these up-bars, prices are going to fall. Point D Friday. A down-bar closing near the lows. Anticipate some sort of down-move next week that is going to hit that horizontal line (Point E). If it does that on a narrow spread with low volume, then you have a very low risk area to go long. These markets trends always run longer than you think they will. We do not appear to have had a so-called buying climax yet ion the tops. Surely this will eventually come and will mark the top of the market. You need to be able to anticipate what the market is likely to do based on Wyckoff principles so that you are not taken by surprise when these things happen. It would be very easy to miss these major principles because the News will always be in the opposite direction. Remember, it is not the News in itself that causes these huge moves or principles appearing, it is the fact that professional money will take advantage of the News which they will know in advance, to better their own accounts.

MINI S&P500 4 HOUR CHART

Point A This is the shakeout we saw on the Thursday. All sorts of rumours suddenly appearing, including fat fingers, oil spill in the Gulf of Mexico, even the problems with the British electoral system, and of course not forgetting Greece, who are virtually bankrupt. So all sorts of News is attached to this. None of it of course is true. This is a deliberate manoeuvre by the market specialists and the professional side of the market to shake people out. Point B Note it is responding upwards on no demand, an up-bar, narrow spread, closed off the highs, volume extremely low. This is going nowhere right at that moment. Point C This is similar. Here we have an up-bar. This one has closed in the middle, spread narrow, volume very low. Point D Friday. Again we have a down-bar, ultra-high volume, closing in the middle. This has to be buying. Only buying can do this. If that volume represented selling, you wouldn't have a narrow spread down, you'd have a wide spread closing on the low. We are still keeping a sharp look-out

for a VSA principle that we know is going to happen somewhere along the line. We are going to see a down-bar, narrow spraed, low volume, showing that the supply that was present has now dried up. That would allow the market to go up, and low and behold we see that bar at Point E. We've drawn a horizontal line across the close of Friday's close where volume was very high. If next week the market dips down and touches that, especially if the spreads are narrow and the volume is low, this means the volume has dried up, and you would expect higher prices.

MINI S&P500 5 MIN CHART - just after the close Friday 14th May

This is the action at the close of this market in Friday. Point A This is a sign of weakness. An automatic signal has appeared (potential buying climax) - very high volume, closed almost in the middle on an up-bar after we've seen some sort of up-move. Point B Note the blue, low volume up-bar - no demand. Point C Another sign of weakness (upthrust). An up-bar, narrow spread closing in the middle, volume extremely low. This means that the market could easily drop off come Monday.

GBP/USD DAILY CHART

Point A You can see by the lower green trendline, we are over-sold. A widespread down, closed in the middle, would indicate some support, but note the volume is not all that high, so there is not a great deal of interest or support in the Pound at the moment. Point B This is immediately followed by an up-bar that attempted to go up through the lower trendline, completely failed, fell onto it's lows, and look at that very low volume. There is no demand in there - that is why this happened. Point C Here we have a widespread down closed on the lows, now the volume is high. This could quite easily be a sign of weakness. As Wyckoff principles tell you, when you see a widespread down closed on the lows with an increase in volume as it approaches a former area of support, it can easily be a sign of weakness. So here we proceed with great caution. We need to let the market tell us what it wants to do. Point D Friday. Here we do have a narrow down-bar closing just off the lows. But look at that very low

volume. There is no selling pressure in the Pound at the moment. You would expect this market to drift sideways or go up back to that lower trendline. Tom Williams NEWS FROM THE VSA CLUB TEAM

The Best of Wyckoff International Conference 2010, West Palm Beach, Florida - 15th & 16th May - This promises to be a groundbreaking event with keynote, experienced speakers, and latest news is that Andrew Maguire (formally a trader with a large institutional bank) who is currently at the center of an international firestorm for exposing what could be the largest manipulation fraud in history, is speaking at the event. The event is also being webcast live for those who cannot attend the event.

What's happening in the VSA Club this week:- This Educational Monday 17th May - 1200hrs CST - Educational Monday with Dr Gary Dayton - An interactive session with Dr Gary Dayton with bar-by-bar analysis of charts. Come along ready with your charts and questions. The Tradeguider Live Trading Room - Wednesday 19th May at 1800 hrs CST The Tradeguider Live Trading Room - Thursday 20th May at 1030 hrs CST In the Tradeguider Live Trading Room we will be trading stocks, Futures or Forex, depending on market movement. Friday - Live on Friday with Tom Williams and Philip Friston. The session will start at 0830 hrs CST with Tom Williams, watching the opening of the market, and then at 0930 hrs Philip will join us reviewing and analysing Stocks and answering your questions. For this event, as for all events, log in to the website and register by clicking the link as usual. Members are very welcome to contribute to our Newsletter. If you have anything you believe to be Newsworthy and of value to our members, then do submit it to us and we will announce it was sent in by you. Send any contributions to rita@tradeguider.com Have a great trading week. VSA Club Team