I was playing around with a new indicator in TradeStation that shows a similar style of Market Profile (Time, Price, Opportunity) charts and wanted to show the recent progression of the big move up recently in the S&P 500 (SPY).

Let’s take a look at the chart and see what the “profile” reveals:

(Click for larger image)

You’ll almost certainly need to click for the full-size image – as the chart image is large.

The first thing that jumped off the chart at me – in terms of “Market Profile” concepts – is the unique bounce-move up off the August lows.

Students of MP techniques will note that the “Value Area” (the vertical dark black line I highlighted) continuously rose during this bottoming-period.  This type of pattern is common at rotation price bottoms ahead of a big move – which is what we got.

MP Students would also note the “Excess” or rejection tails (highlighted) at the $114 level (the “Bs” and the “As”) which represent buyers rushing in to buy the ‘excess’ or long tail of the price extension lower that failed to generate lower prices.

A popular statement is:

“The market auctions lower to shut-off selling” – and in this case it did so with three ‘rejection’ tails.

Flash-forward through the rally – notice the Value Areas continued to climb – to the present.

Though other indicator charts show all sorts of bearish negative divergences, the profile=style chart above reveals a stable and rising Value Area in the context of the current price consolidation.

Whatever your bearish thoughts may be, that’s somewhat bullish from this chart perspective – value is rising.

Prior to our current stabilization and Value Area distribution and price rotation around the $116 level (in the SPY – 1,160 in the S&P 500), we had a similar multi-day Value Area stabilization region just under the $115 (1,150) area.

That was a known price resistance level that the market recently broke – and value is now congregating above that level.

So, unless we see a sudden price move back under the $115 (1,150) value area, the profile style chart may be hinting at even higher prices to come.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

(note – “Market Profile” is a registered trademark of the CME Group/CBOT)