I can’t believe that in the last 2 days, the SPY daily chart is showing more than a chart pattern. My eyes must be playing trick on me; but did you see the floater in the chart below? Yesterday a dump; today a floater! Yuck!
While today price action took out yesterday high, the overall trend based on the last 5 days is still down. In order for me to be convinced that the bull is back, price action has to take out the high of last Friday (June 22nd). Meanwhile, today gallant move of the bull is nothing more than another dead cat bounce. Yeah, just like the one last Friday.
So far, yesterday and today price actions are trading around the 50% retracement of the low of June 4th and the high of June 19th. You can see the dashed line (50% retracement) that cut thru yesterday and today daily bars.
The big question here is, “Will this support at 50% retracement hold?”
If it doesn’t hold, then that mean price action will have to break thru the low of yesterday.
The thing about using the Fib retracement system is that you also need to be alerted to the “failure” of the Fib supports and resistances. A failure of the Fib retracement means those supports and resistances are not there anymore. Thus, if the 50% retracement fail to support today and yesterday price action; I will expect the market to continue the downtrend to the next support level at 130 area (see the dashed red line).
In summary, although I got bumped out (again!) of my TZA and SKF positions today, I’m still not convinced of the bull taking back the helm. While I’m surely missing out some of the bull run in some stocks, I consider the price range b/w yesterday low and last Friday high a dead zone. Therefore, I’m now sitting on 90% cash due to my reducing some more of my long-term holdings.
Having only 10% exposure in the market and no plan to invest more in the “bullish” side inside the dead zone; I think it is time for me to stop and smell the roses so to speak.
Almost forget, can somebody FLUSH the toilet already!
Below is the SPY daily chart which I highlighted in red rectangular box the “Dead Zone”. My interpretation only, of course!Twitter