3 As 2012 revision of economical and financial Armageddon looms (again), let’s take a quick look at the $SPY and see if we can ascertain what’s going on here.
First we’ve got regular ol’ SPY daily chart, which shows a much-discussed-by-now-and-oh-so-obvious H&S pattern with a close below neckline.
Measured move for completion of this pattern is low 1280-ish. For those of you who’ve had a chance to read my Titanic Syndrome post, which calls for at least 10% decline off a recent high, this target – while, perhaps painful – should be of no surprise.
As clear as H&S pattern on SPY may be now, I first noticed it when I looked at the equal-weighted SPY index – SPXEW. I like to take a look at it every now and then as it represents a more accurate picture of breadth in the market. Here’s the same look on SPXEW chart:
We can take another look at the index by employing Renko charts. The beauty of Renko charts is that they filter out all the noise and allow you to see the price movement rather clearly. Some traders follow a Mechanical Trading System based on Renko charts, so if you’re interested, give it a read (h/t to @FibLine for introducing me to Renko charts) . As is pretty clear from this chart, we do indeed have a ‘Sell’ signal.
And yet another look comes from an Ichimoku chart of SPY. I have just recently started reading up on these and am far from being an expert, but from what I do know, being below this cloud thing is pretty bearish. You can also notice a ‘Sell’ signal issued on 4/17 when base and conversion lines crossed (or whatever the proper Japanese names for them are, I know I’m going to get some crap from the experts on this one 🙂 ).
Well, there you have it. As well-liked-by-everyone-until-Sopranos-ended-with-their-song ‘Journey’ sings – ‘Any way you want it’… The picture is rather bleak. As I am not a permabear (or perma-anything for that matter), I do hope I’m wrong.
On a brighter side, we are due for at least a short term bounce. Bonds gapping up and closing above their BB and VIX being above its BB ( h/t to @ukarlewitz for pointing that out) as well adds to the probability of a short term bounce. However with May seasonality and the way the charts look at this point it may be but a short reprieve. What’s also a bit disconcerting is – as @chessNwine pointed out – we should be bouncing already, but we are not. In the meantime keep plenty of dry powder on hand until it’s time to be aggressive and good luck!
3 Responses to “Any way you want it …”
Woodshedder
Good post. Email [email protected] and ask Jeremy about an image resizer plugin so that your charts fit.
The Fly
width 603 will do
rickyroma0
Hm. Didn’t seem to. It’s 605 now, tried 603 too, still too big. I’ll try the resizer when I get it.