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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: Can It Sustain This Ralley? 0 comments
    Aug 19, 2012 11:31 AM | about stocks: SPY

    Technically Speaking

    RSI- as the stock has been moving up, the SPY's RSI continued to show atop. Finally into the first week of August it broke through that resistance level on strength and has defined the strength in this summer movement. It is very close to the over bought level, but it looks like it is just touching it. Very strong technical picture here.

    (click to enlarge)Bollinger Bands- After moving up and down in a peak and valley pattern, the stock recently has been riding the upper band and this signifies a very strong movement. I would have to say I expect the stock to continue moving up.

    MACD- Originally I was looking at a negative divergence in the MAC D and its Histogram. It does still exist and is more pronounced, but it is also an island. There is no other support for the turn so I cannot put a whole lot of faith in what I see there. The move up is strong.

    Current Events

    In the absence of data or policy catalysts and with the S&P 500 near four-year highs, market participants are hoping technical indicators hold the clues on whether stocks will sell off into September following a slow-speed rally. True to form, market volumes have dried up in August. To some, the lack of volume is a clear signal of the relative weakness of the recent rally.

    Strategist at Auerbach Grayson in New York, said in his latest note. "With both volume and volatility absent from the advance ... conditions are ripe for a rapid risk reversion to the mean."

    The minutes of the latest Federal Reserve policy committee meeting, due Wednesday, could be the week's highlight in terms of calendar events as bets on intervention in support of the economy are partly to blame for the recent melt-up. But with the Fed's annual economic symposium starting the following week at Jackson Hole, Wyoming, the Fed minutes could prove to be an insufficient market driver.

    After a summer of low volume and high gains, the stock market soon will face the challenge of whether it can sustain a rally once the crowd comes back from vacation. A market that rallies without a lot of participation is generally standing on shifting ground, at least according to Dow Theory, which uses volume confirmation as a key tenet in testing strength.

    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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