Monday, April 22, 2013

SPY Technical Analysis

Click on Chart to Enlarge

This is an hourly chart of SPY which is the S&P 500 ETF.  The daily chart is not shown but has triggered a parabolic SAR sell signal, so price is below the SAR point.  Also not shown is the weekly chart which also triggered the SAR sell signal last week, so price could be considered to now be in a downtrend on those larger time frames.  Of note on this chart though, we can see that price is above the SAR point on the hourly chart and has some room below it before triggering.

So here is my take away from the multiple time frame set up.  When you see a stock or market trending in one direction on the larger time frames, you can then use your indicator set-ups and triggers on smaller time frames to trade in the direction of the larger trend.  So in this case, for a short sell swing trade on SPY, I would suggest waiting for the hourly SAR to trigger, and if it does so AT A LOWER HIGH than the recent all time high, then that could be a nice short entry.  Also, possible is that the first SAR sell signal fails and leads to a higher price high and possibly some technical divergence.  In that case, then we could again take the next SAR sell signal to trigger.

Similar comments could apply for the MACD indicator set up.  The daily is down and coming off a sharp bearish divergence.   The weekly is flat.  The hourly is up, and if the hourly MACD turns into a sell at a lower high than the recent all time high, then it could offer an opportunity to short.

We will want to pay attention to whether this move up is able to retrace the recent decline in less time than it took to form or not.  That will help us objectively gauge the direction of trend strength in the market.

Currently the 153.60 level on SPY has been tested 3 times and held.  If prices move below that level, it could offer a continuation entry for additional downside, and be probable confirmation that we are in a correction.  The daily bollinger band is currently at that level as well, and prices rebounded after touching the lower band.  That is to be expected in an uptrend.  And in the initial move down off of a high, it often will occur as well.  But if prices break below that low again, then it indicates weakness and will probably lead to downside follow through in my opinion.

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