That Which Is Seen and That Which Is Not Seen

I took the title for this post from a fellow named Fredric Bastiat. He wrote a beautiful introduction to economic thinking with the same title in 1850.

In trading there are phenomena that are seen and phenomena that are not seen. The latter are often more important to notice than the former. Why ? Most people tend to react to what they see, and this is what produces highs and lows in the market. To get a jump on the crowd you have to learn to react to phenomena that are not seen.

Today's e-mini action is a case in point. Twice today I thought the market was likely to react 12-14 points. But nothing happened. Instead it continued on its merry way upward. This was especially surprising to me. The market was close to matching its biggest rally of the past two months (red arrow) and was challenging resistance which stood at the level of the November 21 low at 739 (dashed red line). Either fact would normally produce a visible reaction, but neither did.

The other unseen phenomenon for today is the absence of high volume on the persistent, all day rally. Volume has at best been moderate today. This is unusual for an up day like this and many would interpret it as a bearish indication. But I don't.

I think the moderate volume and the lack of any significant reaction today tell us that there are not many sellers here, even though the market has encountered what should be resistance. This tells me that the market is "sold out". It is a very positive sign and more evidence that the e-minis are on the way to 840 during the coming weeks.