Diary of a Financier

Intraday update: SPY at resistance, to retest correction lows

In Capital Markets on Wed 7 Oct 2015 at 11:11

My last update nailed SPY’s intraday reversal, its subsequent (1st) support, and the ensuing rally.  Now, SPY has reached my “target 1st resistance ~199.5 (+4.2% fm current), which is the 15min LT H&S top’s R shoulder,” and therefore I expect a reversal lower starting right now

Having been +1% earlier this morning, SPY (currently @ 199.0) has started to retrace after hitting my target resistance, as mentioned above.  Here are the steps of the pattern I expect it to follow henceforth…

  1. 188.4 (-5.3% fm current)SPY 15min/daily 2015.10.07
    target, 1st support
    neckline support of 15min LT fulcrum bottom
  2. 187.0 (-6.0% fm current)
    2nd support
  3. 182.0 (-8.5% fm current)
    3rd support
    neckline support of daily LT H&S top

I do expect my target support @ 188.4 to hold, but we’ll see how the charts morph.  Earnings season will have reset the bar by then, sentiment should be flushed-out enough, and seasonality will be a tailwind.  In support of my thesis, the chart of SPX’s normal seasonality shows that October generally retests the lows before the correction ends and recovery rally (+6.2% average) into year-end begins…

SPX seasonality~~~~

Having removed our hedges last week, we’re re-engaging them today in preparation for this retracement.  Our current positioning is as follows…

  • Allocation (vs 60/40 benchmark):
    54% equity (net)
    35% fixed income
    6% cash
  • Beta (vs 0.76 benchmark):
    0.70 β
  • Sigma (vs 0.78 benchmark):
    0.79 σ

–Romeo

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