hard · Volume Spread Analysis
The S&P 500 has been trending upwards in a channel. As it approaches the upper supply line, the spread narrows significantly, the volume drops to 0.6x the average, and the price closes in the middle of the bar.
What does the principle of 'Effort vs. Result' suggest about this situation?
- The low volume indicates a successful Test of the supply line, confirming a breakout is imminent.
- There is a lack of demand to penetrate the trend line, suggesting the supply line will hold and prices will rotate back down.
- The move is 'Falling Pressure' in reverse, indicating that the market is rising under its own weight and should be bought.
- The narrow spread shows that the professionals are 'capping' the price, which is a sign of strong absorption and a buy signal.
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