Stock Market Technical Analysis On SPY For July
On this July 4th long weekend, I'm going to bring you up to speed on the SPDR S&P 500 ETF (SPY).
Studying the weekly chart on the SPDR S&P 500 ETF (SPY) you will understand that in the previous week we hit the neckline and officially created a bearish Head and Shoulders top pattern. I alerted you to this pattern several weeks ago, and we have been devotedly watching it ever since. If you stay up on my real time Twitter and Facebook updates then you knew on the dot when the neckline was closed last week and the short ETF I purchased.
In the episode I sketch a blue line for the neckline on the weekly chart so that you can witness how it was taken out. That was a injurious defeat for bulls and a enormous triumph for bears. The volume is doing a classic stair step formation as selling has grown into the testing and breach of the neckline.
I debated with a market analyst last week who thought that I should pay little attention to the breach of the neckline for the reason that it happened on low volume. That low volume, he said, meant that SPY was not going to go any lower. He was mistaken and I was correct. Learn as a result of his slip-up. Price movement trumps volume every time. Volume is often a lagging indicator.
The MACD on the weekly chart reveals a double thrust to the downside on the histogram bars. Double dips to the downside are very bearish. More often than not the histogram bars form neat waves above and then beneath the 0 line. Double dips are fairly rare.
I compellingly advise you to be short this market. You can do a S&P 500 short, a Russell 2000 short, or you can short an separate industry like consumer services or finance. Whatever you choose, you have to understand that it is going to be easier to earn money playing the short side rather than on the long side for now. Attempting to make money on the long side will be like a fish swimming upstream. You can still do it, but it's going to be a lot of extra work. It'll be easier to stock trade with the undercurrent than against.
I can really hit myself because I was short this market for most of May and then from June 7th to June 18th a paradigmatic Head Fake was created that made me take profits in my short and go long. Like you can see from the stock trading history that's updated in real time using Google Docs on my website, I had two successive losses back to back on the long side because of this Head Fake. This is just part of stock trading, you will never get all your calls right. My current accuracy is between 70% and 80% with my long, 10 year accuracy rate at 75%. As long as I cut my losers fast (5% loss) and let my winners ride (between 5% and 10% gain then sell), I really like this 70% to 80% accuracy.
Nevertheless one thing you'll become aware of about me, I make no apologizes when I get a call wrong because it is just part of trading. I understand that as long as I can get 70% to 80% accuracy, I'll make money. The imperative thing to concentrate on is not your wrong calls, but in repositioning yourself to get it right. The entire idea is to get it correct as swiftly as you can.
In the video below, I carry out technical analysis on SPY in three time frames: weekly, daily, and hourly. You do not want to miss this video and especially where I explain to you the hourly chart and what I think is end of quarter window dressing by money managers as they reposition themselves. I too let you see what stocks institutional traders repositioned themselves in.
Have a good 4th of July.
Article Source: FxTradingStock.com
About the Author
Give live stock market news and real time stock trading updates. Explode the profits of your trading account by always knowing which way the stock market trend is and watch over 100 hundred videos and stock trading lessons all totally free at stock market technical analysis
by: Mike Smith.
Total views: 38
Word Count: 673
Date: Thu, 8 Jul 2010
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