This is weekend technical analysis on the SPDR S&P 500 ETF (SPY) for trading on Monday, June 28 2010.
The reason behind why we look at the weekly chart to begin with, even if we make money with a much shorter time frame is that initially we need to determine the trend.
How many times have you been charting a time frame and you jump in for an entry off a support or resistance line only to be stunned by a price move you did not think was coming? This takes place because the price moves external to the time frame you were studying.
To get around becoming fooled like this, you need to study a higher time frame in an attempt to ascertain the trend. That’s the reason why we study the weekly stock chart to start with.
The weekly chart of SPY ended the week with a Bearish Engulfing candlestick. The MACD stays negative on the weekly chart. We too see a Bearish Head and Shoulders top forming and we are barely on top of the closing of the neckline representing the right shoulder.
Zooming in on the daily chart, we understand that the neckline closes at around $104.70 . We too have the MACD falling lower than the 0 line.
In half a shake the viewer thobbit60 writes, “I agree with your bearish analysis. Hence why not short SPY?” Refuse the impulse to short SPY until the neckline is closed on the Bearish Head and Shoulders top. It too is sensible to have at least one day of confirmation beneath the neckline on increasing volume. We know how enticing it is to spring first nevertheless you have to try and be patient.
The hourly chart reveals the rapid change in institutional trader opinion beginning last Monday, 06-21-2010. Why? What happened?
To answer that inquiry you have to go back to the gap on June 10th 2010. That bullish gap up happened as the consequence of weekly jobless claims falling by the biggest amount in over a year. As a result the mass of stock market participants thought that the economy was still gradually getting better. On 06-21-2010 this all changed with the reports that housing construction was officially in a double dip.
As the week went on, new bad housing news came with the plunge in home sales. Then GDP was revised downward. Since housing is such a significant part of our economy making up 70% of GDP, institutional investors realized that a double dip in the housing market can very well indicate a double dip recession. [youtube:z6aqvPXHGpM;[link:stock market analysis spy];http://www.youtube.com/watch?v=z6aqvPXHGpM&feature=related]
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