subject: Technical Analysis Stocks The Spdr Standard And Poors Etf (spy) [print this page] Advanced weekend technical analysis on SPY for stock trading on Monday, 06-28-2010.
The basis for why we study the weekly chart in the beginning, even while we trade with a much shorter time frame is that in the beginning we should prove the trend.
How many times have you been watching a time frame and you jump in for an entry off a trend line only to end up being bowled over by a move you did not notice was coming? That takes place because the price moves outside the time frame you were studying.
To steer clear of becoming tricked similar to this, you have to study a higher time frame in an effort to determine the trend. Specifically that is why we look at the weekly stock chart at the outset.
The weekly chart of the SPDR S&P 500 ETF (SPY) ended the week with a Bearish Engulfing candlestick. The MACD stays negative on the weekly chart. We additionally see a Bearish Head and Shoulders top being formed and we are barely above closing the neckline on behalf of the right shoulder.
Looking closer at the daily chart, we realize that the neckline closes at approximately $105 . We too have the MACD breaking under the 0 line.
Now YouTube viewer thobbit60 writes, "I concur with your bearish analysis. Thus why not short SPY?" Refuse the impulse to short SPY until the neckline is closed on the Bearish Head and Shoulders top. It also is wise to get at least one day of confirmation beneath the neckline on increasing volume. I get how appealing it is to leap first but you need to try and be patient.
The hourly stock chart shows the sudden change in institutional investor emotion starting last Monday, June 21 2010. Why? What occurred?
To answer that inquiry you must return back to the gap up on June 10th 2010. This bullish gap up happened as the result of weekly jobless claims tumbling by the largest amount in over a year. As a result the majority of market participants thought that the economy was still slowly getting better. On June 21 2010 this completely changed with the reports that housing construction was formally in a double dip.
While the week went on, added bad housing news came with the plunge in home sales. Subsequently GDP was revised down. Since housing is such a crucial component of our economy making up 70% of GDP, investors realized that a double dip in the housing market can very well mean a double dip recession.
