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8.03.14 Sunday
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The Levels 2 Watch
[Daily Chart with 100SMA]
We have lot of things going on in this chart so let’s break it down.
- 100SMA has been strong support since the late June of 2013. Currently, we are sitting right on it.
- Blue-dotted rising line is a potential support because it hasn’t been established yet unless we bounce right here.
- We did throw a high-wave doji candle right on that ‘potential support’ last Friday. Doji really is a wild card. It can be a reversal candle or it can just be a continuation. As of today, we do not know how it’s going to be served. If we can gap up tomorrow with bullish candle, that can be a morning start bullish reversal or if continue to the downside, that doji was just a resting pattern. I guess will find out soon enough.
- Fib. Retracement Zone (yellow highlighted) is a potential level to look for a bounce. It is conveying the fact that as long as we bounce at one of those levels, the primary uptrend will continue.
- If #1-4 fails, we still have that strong uptrend support (rising red line – see green arrows)
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The Impartation of RSI
[Daily Chat with 100SMA & RSI Indicator]
It’s interesting to look at RSI along with 100SMA because it has been on-point (see yellow highlighted) for sometime now. This means we do have high probability of a bounce here because it has been served as strong level of a bounce since late 2012. We have been in such a bullish trend that, S&P 500 Index ($SPY) has only touched ‘oversold status (20-25 readings)’ on RSI only 5 times (including today) since late 2012. That’s a strong uptrend. What we have to understand about the indicator is that, it CAN stay at ‘oversold status’ for weeks and months. This does not mean it has to bounce so I am looking for a price action to confirm the RSI’s insinuation today. Next 2-3 days we might have better idea. I will try to update this post as it progresses.
6 thoughts on “$SPY Looking for a Bounce Here”
Hi Kay, what do you think of this week’s moves of SPY/QQQ/DIA? The technicals looked ok for the bulls, but I just have some sort of strange instinct that something is wrong. To some extent, the market sentiment look very similar to Oct 1987. I understand there must be some kind of topping patterns for a couple of months before I start to worry. Although the chances are very little, I am starting to think that the market could drop sharply without forming any topping patterns, like it did back in Oct 1987 – it just formed one lower high and declined sharply for 3 weeks. I don’t know… sometimes, my instinct works very well, even though my technical analysis tells me in a different way.
$TNX broke the support and moved sharply lower this past week as well. Do you plan to hold on to your long positions for some time? Any insight would be much appreciated. Thanks.
ryanvan Yea, $TNX tanked last week and with volatility we saw on Friday, we may get some turbulence on the equities next 1-2 weeks. Tough for me to say the market is going to roll over, just yet), but definitely I don’t think we are going to see smooth move to the upside. I still have to favor the buyers (miner/intermediate term) at this point because of the price action last few weeks.
2kaykim ryanvan Yeah, I agree with you. I don’t know why though, but it is just my feeling that charts look somewhat similar to Oct 1987. In 1987, $SPX and $INDU had a minor correction between Mar-May for 2 months and then had a rally for about 3 months before the crash. $NDX had a failed double top in Mar-May and had a rally for 3 months. In late September, $SPX and $INDU retraced about 61.8%, while $NDX hit a new high and then crashed. Today, $NDX had a failed head-and-shoulder in Feb-Apr this year and had a rally for about 3 months and hit almost same high last Friday, while $SPX only retaced about 61.8%. These indices have been acting quite similar up until last Friday. Well, it might turn out differently this week, but it is just worth noting…
2kaykim Another interesting data is that $SPX and $INDU made a high on Oct 11, 2007 and retraced 61.8% by Oct 31, while $NDX hit a new high on Oct 31, 2007 before the decline. It looks somewhat similar as of today. This time could be a warning signal, or it could just be another data mining done incorrectly =)
2kaykim The what-if scenario is now nullified and it is now more likely that we could see another all time high =) Another lesson: just because a certain structure/pattern is present does not necessarily mean that the same pattern will be realized.
ryanvan yea interesting nonthless.. we’ve been V-shaping higher on every pullbacks on that 100SMA