SPY Technical Analysis

Click on Chart to Enlarge

This post is kind of a technical follow-up to the trade recommendation earlier today. The chart above is a 10 minute chart of SPY which is an equity/ETF that mirrors the performance of the S&P 500.

The chart shows a bearish divergence on the MACD indicator during this afternoon's highs. Looking back at the chart, other bearish divergences above the zero line have resulted in significant pullbacks. This technical situation coupled with the overbought short-term model, indicate a pullback is likely soon. Another factor supporting a bearish short-term move is that this overbought signal is under resistance at 92.50 from highs earlier this month, so this is essentially a "lower high" indicating a potential downtrend.

In choppy overlapping corrections like the market is presently in, I find that the 127.2% and 141.4% extensions of the most recent move are often a solid resistance zone. Those levels would put SPY in the 83.00-84.00 range. If we get an oversold signal near those levels, I think it could be a good bullish trading opportunity.

Pete