That was the week that was

Welcome to our Newsletter for week ending 29th May 2015

The daily chart of the S&P 500 Futures market. (Friday, May 29th
2015)
This will mirror image the cash market. The two indexes are kept in
line with each other by traders who specialize in arbitraging. Here,
we can clearly see the chart is overbought.

Point A: Friday, May 15th 2015

Point A shows lack of demand as the market rallies. . We can see it
has been marked up on a narrow spread closing in the middle. This
is a sign of weakness. An automatic red arrow appeared warning us
that we have no demand. The next bar does not close lower so
although this weakness has appeared it takes some time to show
itself

Point B: Monday, May 18

Here, we have a blue up bar, but we do note the volume is not
backing the move up. Of course, the professionals are aware of the
weakness seen on the previous bar.
Point C: Tuesday, May 19
Here we have a red down bar, but we note that this has a very high
what we call Top Tail to it. This coupled with the low volume seen
on this day would indicate they tried to mark it up but there was a
lack of demand seen entirely because of the weakness seen in the
previous two bars.
Point D: Wednesday, May 20
We have another very similar down bar. Again, we have a
substantial Top Tail. These are weak looking bars.
Point E: Thursday, May 21
Here we have a blue up bar closing well off the high. We note there
was an attempt to test the market seen by the bottom tail on the
bar. Volume is still quite sluggish. Remember, bullish volume is
expanding volume on up bars, while decreasing on down bars.
Bearish volume is increasing volume on down bars while decreasing
volume on up bars.
Point F: Friday, May 22
The market fails to make new highs and closes on the lows. This is a
weak bar.
Point G: Tuesday, May 26
The market opens after the long holiday weekend and is marked
down rapidly. The low of this bar will be significant next week as if
the market breaks below this we will quickly see lower prices. If this
area is tested successfully the market may hold.

We have a widespread down bar. The volume has definitely

decreased and we have closed well off the low. It would appear to
be a lack of selling or supply on this bar.
Point H: Wednesday, May 27
Here we have a widespread blue up bar responding to the lack of
supply on the previous bar. We do note, that the volume has now
become excessively high. Professional traders are fully aware the
weakness we have seen since Point A.
Point I: Thursday, May 28
Here we have a blue bar which appears to show they are seriously
attempting to test the market. However, we know if there is a
genuine test, the volume has to be less in the (2) previous bars. Here,
we can clearly see this in not so. Supply is still present.
Point J: Friday, May 29
Here we have a red down bar on a very wide spread. Although the
volume has decreased, we now have what we call on the previous
bar a failed test which is a definite sign of weakness. To me, it looks
as if the market is liable to go lower. We still must follow looking for
principals. That is, if they are bullish come Monday or Tuesday they
will test the market. There will be a red down bar on a narrow
spread closing in the middle and volume less the previous (2) bars.
That is the hallmark of test where you expect higher prices.
Certainly, we will not go up very far if there is no accumulation
phase. If a market is weak, you are liable to see up bars on No
demand. Especially at the openings of the S&P pit.
Tom Williams
US Stock HD Home Depot
This stock was highlighted by Philip Friston in Fridays Live on Friday
with Tom Williams and so we have included it in this weeks

newsletter. Analysis on this stock is done by Gavin Holmes, Author of

Trading in the Shadow of the Smart Money.

Point A: Tuesday, February 24th 2015

Point A is a very unusual but important VSA principle. Usually on this
type of bar that is gapped up into new high ground and the volume is
massive and the spread is narrow we would expect to see one of my
favourite signals, The End of a Rising Market, however this signal is
called SOW 54 Supply Swamping Demand.
The reason for this is that the spread is not narrow enough for the
software to detect this as The End of a Rising Market but the
principle of distribution appearing on good news is very clear. Please
look at the dates of the news and the chart, identical!!
This happens all the time and now we can watch this chart very
closely in the next few weeks for a clear change in trend. I do not

short immediately I see this weakness because the instrument could

continue to go up due to momentum or could Upthrust.
This is now top of my watchlist as an opportunity to use PUT options
on this stock.
The News, Bullish 24th February 2015.

The Chart SOW 54 Supply Swamping Demand 24th February 2015

Note the massive volume as the stock gaps up on the great earnings
report on 24th February 2015. The Smart Money have an
opportunity to profit from the herd buying as all the herds
mathematical indicators tell them to go long (MACD, Moving

Average, Stochastics etc). This is a warning sign that a short set up

could appear, so we wait for confirmation and change in trend.

Point B: Friday 20th March 2015

At point B (on chart prior to one above) we see another attempt to
rally to the top of bar A but the volume is very high and the next bar
closes lower, so this is evidence of more supply hitting this stock.
This is SOW 26 Supply Coming In. The stock drops to $106.62 and this
will be a key level to short if we have a Gotcha Bar at this level.
Point C: Tuesday 19th May 2015
This is SOW 68 No Result From Effort. When I see this VSA principle
it reminds me of the Discovery Channel program The Deadliest
Catch. In this program crab fishermen venture into the Barings Sea
to catch crab. The fishing boats are loaded with pots that weigh
between 600 and 800 pounds and have to be launched into the sea

with a great deal of human effort. It is not uncommon for this to

take over 24 hours to achieve.
The fishermen then return to retrieve their pots after leaving them
to soak. The retrieval process takes longer than the launching of the
pots so massive effort is required to bring the pots back on to the
boat. What you may ask has this to do with SOW 68.
Well, if we were to chart an unsuccessful crab fishing trip where a lot
of effort was put in to catch the crab but only very few if any were
caught, and you were to chart this, you would be seeing No Result
From Effort. This is weakness.
Point D: Thursday 28th May 2015.
This is No Demand SOW 27, and is confirmed by the lower close on
Friday. No we watch and wait, this could move lower quickly so put
this on your watchlist.
As always I wish you good trading and constant profits.
Best wishes,
Gavin Holmes