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John Mylant
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Residing in Colorado Springs, Colorado. Has been trading and coaching using a self-developed option trading system for 10 years. Philosophically conservative, accurately trades weekly options with a strong risk management approach. Well sought after by investors around the world, he teaches a... More
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SPY Technical Analysis
  • ETF SPY: Seems Like An Uneventful Week Ahead 0 comments
    Feb 3, 2013 2:26 PM | about stocks: SPY

    Technically Speaking

    RSI- being over bought, I would be interested to see if the stock will move down off its high, but this pattern looks like it is headed back up and may even head back into over bought territory again. It sure isn't acting like it wants to back track just yet.

    Bollinger Bands- the stock appears to have taken a slight rest from (click to enlarge)its journey clinging to the upper Bollinger band. But now it looks like it will continue to move up. I would be looking for the end of this second leg of the bullish trend but momentum does not look like it is coming just yet.

    MACD- The MACD MA's look like they have reached a top but that top looks like it is turning into a plateau. When I am looking for a pullback, I want to see a peak, and it is usually the highest peak. This time though, I am not sure I will see that just yet. Momentum still points up!

    Current Events

    Wall Street's current jubilant narrative is that a rush into stocks by small investors has sparked a "great rotation" out of bonds and into equities that will power the bull market to new heights.

    Even if something approaching a "great rotation" has begun, it is not necessarily bullish for markets. Those who think they are coming early to the party may actually be arriving late.

    Investors pumped $20.7 billion into stocks in the first four weeks of the year, the strongest four-week run since April 2000, according to Lipper. But that pales in comparison with the $410 billion yanked from those funds since the start of 2008.

    Bill Gross, who runs the $285 billion Pimco Total Return Fund, the world's largest bond fund, commented on Twitter on Thursday that "January flows at Pimco show few signs of bond/stock rotation," adding that cash and money markets may be the source of inflows into stocks.

    Indeed, the evidence suggests some of the money that went into stock funds in January came from money markets after a period in December when investors, worried about the budget uncertainty in Washington, started parking money in late 2012.

    With a light week ahead for economic reports and the final major week of the earnings season, there is not much on the calendar in the week ahead to cause the stock market's bull to stumble.

    "Next week my biggest fear is it's such a low news week that we may shift our focus to "sequester cliff" and those budget negotiations in Washington," said Art Hogan of Lazard Capital. The sequester is the automatic spending cuts that take place March 1 if Congress does not act. While some economists think the economy could weather the "sequester," there is an anxiety about it in the market and that could grow.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: SPY
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