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Bill L.
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Methodology: setups require certain criteria to be met before trades can be executed, which include weighted statistical studies on several indicators of price, breadth, volume, and sentiment . Amount of risk taken is proportional to how many indicators are aligned. I mainly trade market... More
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  • Technicals Suggesting A Correction is Imminent- Raise Cash in Stocks 0 comments
    May 13, 2009 2:28 PM | about stocks: SPY

     Depending on where prices close today, stock look like they are dangerously close to breaking the upward trend line. Adding credence is the fact that several different methods of defining support will all give you the same result in this instance.

    Looking at the chart below we can see that if prices close here, they will be breaking hand drawn support. Furthermore, prices as of yesterday broke the Parabolic SAR which is often used to setting stops. Lastly,  we can calculate a close fitting moving average, often a good sign of support for a trend. In this case, we have not closed below the 15 day moving average in over 2 months, and now prices appear to be flirting with that 15 SMA line, so a close below this show be respected as a notable signal.
    Chart 1: SPY - Daily Periods - 2 Months
    I have also observed that volumes have been decline since the beginning of this rally. Also a negative sign, as well as a bearish divergence forming in money flow. Things don’t move in one direction forever, and it looks like the correction in nigh. In weekly bars, the low of last week was 88.38, a close below that should be enough confirming action signals to take a shot on the short side.
    Disclosure: Currently no positions in stocks.
    Stocks: SPY
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