- In Trade Chatter
- Last Updated: 05 December 2012
- By LA Little
Just when you thought we had run out of reasons to hang higher and try to work higher in price, the markets give us another one - Shanghai. The mainland Chinese market has had a horrible year, had broken to confirmed new lows less than a week ago on huge volume and has languished there ever since. Last night; no problem. Up 3% almost and the headlines around the world are about the optimism this brings. Wow, seems like we are really stretching for excuses. The market is an auction house of price that runs simultaneous auctions across many instruments on a daily basis. Price is the mechanism by which value is assigned. As long as there are less supply for the overall market than there is demand, then price works higher - vice versa if the other way. The supply right now is restricted. Yesterday it was quite evident as the expected retrace saw no volume escalation as lower price points were tested and again this morning we see the market work higher as a result. These daily tests are a means by which one can measure where the market wants to go. They happen all day long if one cares to get that micro and they happen on less frequent time frames as well like weekly and monthly charts. They are the pulse of the market. Sometimes what they say is loud and clear. Other times it is feeble and murky. Right now its more of the latter but the underlying tone remains positive overall. Until that changes, price will hang and will work higher. Excuses like China are just some reporters attempt to put logic to the fundamental laws of supply and demand.