subject: Stock Market Technical Analysis On Spy For July [print this page] For this July 4th long weekend, I am going to bring you up to date on SPY.
Studying the weekly chart on SPY you will grasp that last week we hit the neckline and legitimately formed a bearish Head and Shoulders top pattern. I brought this pattern to your attention a few weeks ago, and I have been devotedly watching it ever since. If you stay up on my live Facebook and Twitter status updates then you knew precisely when the neckline was broke last week and the short stock I purchased.
In the episode I illustrate a blue horizontal line for the neckline on the weekly chart so that you can make out how it was taken out. This breakdown was a demoralizing hammering for bulls and a giant victory for bears. The volume is performing a classic stairs pattern as selling has grown into the testing and breach of the neckline.
I debated with a stock analyst in the previous week who thought that I should pay little attention to the crossing of the neckline for the reason that it occurred on lower volume. This lower volume, he said, meant that the S&P 500 was not going to fall any lower. He was incorrect and I was right. Gain knowledge as a result of his gaffe. Price action trumps volume every time. Volume is frequently a lagging indicator.
The MACD on the weekly chart reveals a double thrust to the downside on the histogram bars. Double pumps to the downside are exceptionally bearish. Typically the histogram bars outline nice waves higher than and after that under the 0 line. Double dips are a bit rare.
I fanatically recommend you to be short this market. You can buy a Russell 2000 small caps short, a S&P 500 large caps short, or you can short an particular industry like finance, real estate, or consumer services. Whatever you settle on, you have to understand that it will be easier to earn money on the short side rather than on the long side right now. Trying to make money on the long side will be like a fish swimming upstream. You can still do it, but it is going to be lots of work. It'll be easier to stock trade with the tide rather than against.
I can genuinely kick myself because I was short this market for most of May and then from June 7th to June 18th a textbook Head Fake formed that made me book profits in my short and go long. As you can see from the stock trading history that's updated live by means of Google Docs on my website, I experienced two successive losses back to back on the long side because of this Head Fake. This is just part of trading, you will never get all your calls right. My current accuracy is between 70% and 80% with my long term, 10 year accuracy rate at 75%. As long as I cut my losers quick (5% loss) and let my winners ride (between 5% and 10% profit then sell), I really like this 70% to 80% accuracy.
However one thing you will see about me, I make no apologizes when I get a call wrong for the reason that it is just part of trading. I recognize that as long as I can get 70% to 80% accuracy, I'll make money. The key thing to focus on is hardly ever your wrong calls, but in repositioning yourself to get it right. The entire goal is to get it right as quickly 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 wish to pass up this video and especially where I show you the hourly chart and what I think is end of quarter window dressing by institutional investors as they reposition themselves. I additionally explain to you what stocks institutional traders repositioned themselves in.
