Monday, June 22, 2009

Broken support = resistance

Here is a daily chart of the broad market index ETF, the SPY.

Click for larger, browser back.

Notice the big red candle on the far right... she's a Dusey! Today's market action broke through several trend lines and two of the most powerful Moving Averages known to man. The 20 MA was tested and then broken a week ago, both the 50 and the 200 MA's were decisively taken today.

Prognosis, bearish. That said, I again have a small position in SIJ. That said, it is possible for me to take small profits out as soon as tomorrow. Nobody can be sure what will happen but look at the relationship of today's close to the Bollinger Band. Now does anyone think that BBands are useless?

It is possible for the market to recover a bit tomorrow. for two BBand reasons. First, they are about to give the oversold signal. Second, look at the general direction of the big grey band... it indicates an uptrend. The market will have to do a lot of pulling to whip that band into shape.

Of course, the market will be able to do that, perhaps this week, definitely this month. If you have noticed the pattern that Price is making, you noticed a Head and Shoulders... congrats!
Sadly, today's pullback was on light volume. No worries tho mate! in a few days, everyone will get the hang of it and jump on the bandwagon. There is little prayer in hoping for the markets to recover the lost ground in MA's and trend lines that were decisively defeated today.

When the SPY closes below $88.36, I'll be taking on much larger positions in a diversity of short ETF's.

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