Ten Fast Facts On The $SPY Chart 10/12/14


Chart courtesy of StockCharts.com

  1. The long term up trends last level of support is at the 200 day sma. A close under the 200 day will have me shifting to shorting rallies from buying the dips I have been doing since January of 2013.
  2. The long term oscillator support of the 30 RSI is going to correlate closely with the 200 day sma, giving a double probability of  a bounce as two schools of “buy the dip” will be looking to get long at this level.
  3. We are also getting close to a 5% pull back which has been normal for the past two years. If the 200 day fails, then a 10% correction is on the table, followed by a possible 20% drop into a bear market. The odds still favor a bounce at the 5% pullback, which aligns with the 30 RSI and 200 sma.
  4. Price is far extended from the 10 day sma, like a rubber band stretched to its limit. This results in an eventual snap back, which will likely happen this week. Whether it holds or not is the question.
  5. The expanding volatility is not bullish and needs to resolve before we can confidently go long and attempt to ride the long elevator back to all time highs.
  6. The 200 day sma is where all eyes will be when the markets opens. Bulls are alive and safe above, but below it is the land of the bears. Many long term trend following systems will be selling on the next open if the 200 day is breached at close. It will be dangerous to be long below the 200 day.
  7. The bearish MACD still says momentum is dead. Buying strength is not working currently and momo is a no-go.
  8. Markets in these kinds of small corrections and volatility  have very violent short covering rallies that are dangerous to be caught in. It is better to have a safety margin by shorting strength instead of shorting into the market after the price has already fallen into a hole and is due for a bounce.
  9. I will be looking for long plays this week as the risk/reward is now skewed in the favor of longs.
  10. The more bearish you see the psychology grow on social media, the more bullish I will become for a bounce. Once the majority of sellers are driven out through fear and they are safely on the sidelines, then the market can bounce.