Friday, September 11, 2015

Bearish Short Term Pattern Set-Up - SPY 9-11-15

Click on Chart to Enlarge

Currently the short term picture of the market is indecisive.  Wednesday's high is certainly a key point on the chart.

The chart shown here is a 15 minute of SPY.  What we see is that there is a perfect fibonacci confluence at 198.40 for a possible bearish reversal of an upwards ABC pattern.  Any time the subdivisions in a pattern have a perfect overlap of fibonacci ratios like this I take notice.  These tend to be key areas.

There are a few comments I would make here:

  1. Stocks are likely to rise to that level before reversing lower
  2. Given the other factors I've posted about, I would anticipate a move lower from that area
  3. Failures of a key confluence zone to hold often are followed by a significant continuation
So for the short term trader, a clear set up would be for a 15 minute indicator set up of bearish divergence above Thursday's high and below Wednesday's high.  Likely a 30 minute stochastics overbought signal would occur in conjunction providing a dual time frame set up of 30 min overbought and 15 minute bearish divergence to look at a short entry.  A stop could be set above Wednesday's high.

From the time relations of the pattern, it appears that Monday will be the day at which price is likely to test the resistance area.  At least a mild pullback from the resistance area of a confluence zone like this almost always occurs, in my experience.  However, if that is followed by a break to yet higher highs, there could be follow through.  So having the stop in place to protect is very important.  There is no "safe" stop below Wednesday's high.

The FOMC is scheduled to report next week, so it would seem likely that the market will remain relatively quiet until mid next week.  

1 comment:

  1. The 196.25 region SPY is also a lesser confluence area, and could possibly conclude a small contracting pattern. a break of this morning's/Friday's low would suggest that the 198.40 region may not get tested before downside resumes.