SPY is Unchanged for the day

We started off with a dip in the early going, but the SPY has climbed back up to unchanged, actually a little green. If you are playing the bounce idea from yesterday in which I listed about 8 leveraged market ETFs, then please remember this is a short term trade, we are looking for something very specific here.

This is the triangle formation in the SPY, we are looking for a breakout above the upper trendline, it would have to be rather convincing to have the effect I’m looking for. At that point we’ll want to watch carefully for signs of distribution. If you happen to be long any of those leveraged ETFs and the SPY or any of the other averages make the breakout we are looking for, (1-1.5% would be a pretty decent break) then you’ll want to keep in touch, I’ll also be posting updates.

Financials Update

Since Financials seem to be the key to the S&P moving, here’s an update on what they are looking like right now.

XLF 5 min chart looking pretty strong

Another financial, IYG 5 min looking strong, not quite as strong as XLF, but remember that IYG has been underperforming the XLF the last 2 days.

FAZ, a financial short or inverse is breaking down a bit

SKF is another financial short or inverse ETF and it looks largely the same as FAZ above. So there’s 4 charts that are all more or less pointing in the same direction, Financials to gain ground, which should lift the S&P

MARKET UPDATE

The DIA and the QQQ have started to look a bit more positive.

There was a slight negative divergence off the open, now there’s a positive divergence that’s built in a bit.

The QQQ positive divergence looks even stronger.

The SPY is trading in line with price.

Market Update

Since the last market update near the bottom prices have been moving up slightly, but rather lateral. there hasn’t been much to show, but here’s what it looks like right now. The DIA (1st chart) and QQQ (3rd chart) have had the most movement, although the IWM is starting to show some movement (2nd chart)

SPY largely in line with price, it’s not negative, just confirming price and not really telling us much

The Micro and Macro View

In the micro view, this is what the market has been doing with these triangles before reversing, so this is what I’ve been looking for, a run up above the upper trendline at the white arrow, then the drop at the red arrow, it’s all part of the “snowball effect” I’v described.

Here’s the example I mentioned yesterday in ADM, we have the triangle which is very obvious, the 2 day break above the triangle and then the snowball effect as it falls fast and hard.

From this 15 min chart, it appears the SPY wants to do this, looking at the last time the SPY challenged the lower trendline we saw an accumulation period that ran prices up, but our triangle was not as well defined then and it certainly wouldn’t be as easy then as it is now with a much narrower apex of the triangle (less distance to travel to create a false breakout). However, tme is growing short as this triangle will most likely produce a very directional move shortly as the apex is nearly complete (similar to a Bollinger Band Squeeze).

That’s the Micro view of events. Here’s the bigger picture.

This hourly chart is showing a leading negative divergence in the SPY triangle, this is pretty ugly and puts the odds of a sharp breakdown out of the triangle pretty high. As you can see in the past, 3C on this chart has been reliable with accumulation zones sending prices higher and distribution zones sending them lower. There’s another accumulation zone not marked on the chart right before prices moved up into the triangle, you may be able to see the divergence. The leading negative divergence on a 60 min chart is about as negative as you get.

You can also see the apex of the triangle nearly closed so events should unfold pretty quickly.

USO

USO, looks a lot like silver, it  also looks like in the short run at least, it wants to move higher.

Positive 1 min divergence in USO

If you are having problems seeing the charts, you should be able to click on them to enlarge them.

PSLV

Yesterday the positive divergence suggested more upside in PSLV, so far we have it

Here’s the divergence which has been confirmed this morning

This is the 10 min stop channel I’d probably be using, especially if you bought near the close yesterday. For updates on the stop, email me.

Using the TICK Chart for Early Warning

For those of you who have access to real time data, the TICK chart is a pretty useful tool to get early warning on intraday changes in trend. For TeleChart/Worden users, type in the symbol $TICK. Worden also offers  free real time charting software at http://www.FreeStockCharts.com, there’s no 20 min exchange imposed delay like most other free charting software. The symbol on their free platform should be the same- $TICK. This shows stocks ticking up less stocks ticking down, use a 1 min chart.

This is an earlier tick chart from today when the market bottomed, the lowest reading was -1866 which is VERY low, recently on down days a low reading has been around -1250 so to see sub -1500 was pretty unusual.

This is the most recent Tick chart  captured, remember that this is all NYSE stocks. Notice how I’ve drawn trendlines around the highs/lows. Once the Tick chart moves above +1000 you usually see a pretty decent move up. If the trend line is broken, then you know the trend is about to be broken. Then you simply can draw the next set of trendlines. It’s not a perfect indicator or one with an especially large lead, but it’s useful.

Wolf on Wall Street Test

SPY

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