Diary of a Financier

Intraday update: SPY setup’s critical juncture

In Capital Markets on Mon 7 Oct 2013 at 14:39

Just an update on the S&P 500 ($SPX), which has reached a critical juncture after consolidating since my last note, as expected. The high probability outcome remains a breakout from here.

As I mentioned earlier today, SPY’s 30-minute chart shows a tilted Head & Shoulders bottom with a slanted neckline <$169 and 3x bull divergence. SPY 30min/1min That pattern is a bit weak, due to the tilt, but the 1-minute chart is flashing another, smaller, intraday H&S bottom.  That 1min pattern should bounce off right shoulder support between here @ $168.1 and $168, before rallying to breakout over $168.4 neckline resistance and fill the gap up >$168.7.

That’s from where I derive my confidence in the bull case.  If the 30min chart fails to breakout, you’ll likely see R shoulder support fail and morph the chart pattern into a bearish descending triangle with classic support >$167.

That begins to emphasize the importance of this juncture for SPY, which is entirely governed by sentiment here.  Right now, the market is focused on the federal government shutdown while we await 3Q earnings season, beginning in earnest at the end of this week.

Further emphasis is found in SPY’s daily chart, which is littered with rising wedges, not to mention pesky 2x bear divergence in MACD.  More importantly, the daily pricetrend rests on that $168 support level at the intersection of the 50DMA with both classic and trendline support:

SPY daily

SPY daily

I will buy a bounce tomorrow/later this week that starts to fill the 1min intraday gap >$168.7.  In terms of downside risk, I’m watching for a breakdown at these right shoulder supports (immediate term @ $168 and longer term @ $167.2) with the 30/15mins bull divergences reversing.  Below here, support is all the way down at the longer term rising wedge’s trendline support >$164.

–Romeo

Advertisements
  1. […] followup on my last broad market note from Monday, SPY didn’t give me the tradable bounce I had expected as my highest probability […]

Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s