Diary of a Financier

SPX 2006 analogue update

In Capital Markets on Mon 1 Apr 2013 at 12:26

SPX -50bps intraday to open 2q13 this morning. I wanted to refresh the SPY 2006 analogue, which warned of this downdraft and suggests SPY should continue lower in the short term until its daily stochastic reaches oversold territory. Here’s a chart of the analogue–updated as of Thursday (last business day):

SPY 2006 v 13 daily

SPY 2006 v 13 daily

Small Caps (IWM) are getting particularly hit hard, -1.5% so far today. Regardless, as I said last week, RUT’s stochastic has receded further away from overbought conditions, and the 2006 analogue says its short term bottom will be relatively shallow:

According to the 2006 analogue that’s governed the entire broad market so far this year, a lower-low still awaits SPY–the turn down should occur next week the bottom the week thereafter. But, IWM’s near term low is in (2/25 @ $89), and Small Caps will rocket higher, outperforming for next quarter (14 weeks).

This week offers a buying opportunity for IWM.

–Romeo

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