Stock Market Charts Of The SPDR Standard And Poors ETF (SPY)
Hardcore stock traders here we go for weekend technical analysis on SPY for stock trading Monday, June 28 2010.
The rationale for why we perform technical analysis on the weekly chart in the beginning, even though we make money with a much shorter time frame is that in the beginning we have got to determine the trend.
How many times have you been studying a time frame and you jump in for an entry off a support only to end up being flabbergasted by a price move you didn't notice was coming? This takes place because the price moves external to the time frame you were watching.
To avoid being blindsided similar to this, you need to study a higher time frame in an attempt to determine the trend. That is why we study the weekly chart initially.
The weekly chart of SPY ended the week with a Bearish Engulfing candlestick. The MACD stays negative on the weekly chart. We additionally see a Bearish Head and Shoulders top being formed and we are barely above the closing of the neckline for the right shoulder.
Zooming in on the daily chart, we notice that the neckline closes at approximately $105 . We also have the MACD going below the 0 line.
In half a shake the trader thobbit60 writes, "I be in agreement with your bearish analysis. So why not short the SPDR S&P 500 ETF (SPY)?" No shorting the SPDR S&P 500 ETF (SPY) until the neckline is closed on the Bearish Head and Shoulders top. It also is prudent to get at the very least 1 day of confirmation below the break on increasing volume. We both realize how tempting it is to spring early but you have got to try and be patient.
The hourly chart shows the sudden adjustment in institutional investor sentiment starting last Monday, June 21 2010. Why? What happened?
To know the answer to that question you must go back to the gap up on 06-10-2010. That bullish gap up happened as the end result of weekly unemployed claims falling by the largest amount in more than a year. Therefore the majority of market participants thought that the economy was still slowly getting better. By June 21 2010 this all changed with the news flash that housing construction is officially in a double dip.
As the week went on, more bad housing news came by means of the drop in home sales. After that GDP was revised down. Since housing is such a important part of our economy making up 70% of GDP, institutional investors realized that a double dip in the housing market can very well mean a double dip recession.
Article Source: FxTradingStock.com
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by: Tina Stevens
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Date: Wed, 30 Jun 2010
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