Diary of a Financier

SPY intraday update: Here’s the problem

In Capital Markets on Fri 12 Sep 2014 at 14:29

Here’s the technical problem I’ve been documenting all week…

The S&P 500 ETF ($SPY), Total Market ($IWV), and Small Caps ($IWM) all formed Head & Shoulders tops in their 15-minute fractals to start the week.  I caught the formations ($SPY $IWV $IWM) upon their right shoulders on Monday, after which they all broke-down into the close.  At that point, I was awaiting a test of neckline support-cum-resistance, which we got with a rally the very next day.  That rally has since faded — a rare bear trap followed by a bull trap — morphing the charts once more.

Just before lunch today, I noted the troubling pattern developments that had resulted, and into the close it appears like these progressions are playing-out accordingly:

$SPY 199.6 watch: 15min LT H&S top w $198.8 nkline sppt & 1x bull divgc, ST ascendng wedge w $200.1 restc (R shldr).
twitter.com/romeofayette/s…
2014.09.12 @ 11:46

Hence, there were no confirmations, so I haven’t taken any action thus far, beyond selling a couple losers ($CREE $VLKAY¹) for idiosyncratic purposes yesterday.  Right now, we’re resting on neckline supports for all major indices ($SPY $IWV $IWM), so this is a critical juncture to watch into the weekend:

SPY 15min & daily

SPY 15min & daily

Downside targets would be as follows:

1st support: -2% @ $195 (daily ST bull channel’s trendline support)
2nd support: -3.25% @ $192-3 (both daily LT bull channel support & resistance-cum-support from 5/2014)

The most likely outcome is always the worst thing that can happen²: both a flat trade into the close, leaving SPY at this neckline support over the weekend, then a -1% open on Monday.  That would put us half way to 1st support, making tactical cash-raising futile for position traders such as myself.

–Romeo

¹Volkswagen ($VLKAY): I’ll probably repurchase in October, after a bear flag breakdown out of a larger bull channel; there’s a strong analogue for today’s Europe ($HEDJ) and 2011’s US ($SPY) between QE2’s announcement at Jackson Hole and its actual implementation, during which lag the market underwent its last correction to date.

²”The stock market maximizes pain for the maximum amount of investors.”

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