| Followers | 681 |
| Posts | 141566 |
| Boards Moderated | 35 |
| Alias Born | 03/10/2004 |
Sunday, September 11, 2016 1:33:10 PM
SPY: Finally a Breakdown
By Carl Swenlin
* September 11, 2016
Last week in my article, Two More Months of This Stuff?, I wondered if the market would continue to move in the narrow, boring two-month trading range. This week we got the answer: No. The chart below shows Friday's high-volume breakdown through the support line drawn across the lowest point of the trading range.
When we zoom out for a broader context, we can see that price is approaching a rising trend line, off which we may see a bounce. However, this broader context also shows that the rising trend line is the bottom of a rising wedge pattern, the top of which is drawn from the April top. After Friday's breakdown, the rising wedge is the next clue that we may be in for several weeks of selling, because there is a high probability that the wedge will resolve downward.
The next chart shows our primary medium-term indicators for price, breadth, and volume. They have been trending downward for about two months, showing technical weakness in this time frame. They are around neutral and have plenty of room to move lower before they reach an oversold condition similar to the lows in January.
There is no guarantee that prices will continue lower for any significant period, but September and October are seasonally very negative months, so I have to say that this setup looks very dangerous.
CONCLUSION: We have: (1) a breakdown, (2) the negative implication of a rising wedge, (3) weak technicals, and (4) negative seasonality through October. In my opinion, this adds up to rough sailing for the bulls for several weeks.
Technical analysis is a windsock, not a crystal ball.
http://stockcharts.com/articles/decisionpoint/2016/09/spy-finally-a-breakdown.html
• DiscoverGold
Click on "In reply to", for Authors past commentaries.
By Carl Swenlin
* September 11, 2016
Last week in my article, Two More Months of This Stuff?, I wondered if the market would continue to move in the narrow, boring two-month trading range. This week we got the answer: No. The chart below shows Friday's high-volume breakdown through the support line drawn across the lowest point of the trading range.
When we zoom out for a broader context, we can see that price is approaching a rising trend line, off which we may see a bounce. However, this broader context also shows that the rising trend line is the bottom of a rising wedge pattern, the top of which is drawn from the April top. After Friday's breakdown, the rising wedge is the next clue that we may be in for several weeks of selling, because there is a high probability that the wedge will resolve downward.
The next chart shows our primary medium-term indicators for price, breadth, and volume. They have been trending downward for about two months, showing technical weakness in this time frame. They are around neutral and have plenty of room to move lower before they reach an oversold condition similar to the lows in January.
There is no guarantee that prices will continue lower for any significant period, but September and October are seasonally very negative months, so I have to say that this setup looks very dangerous.
CONCLUSION: We have: (1) a breakdown, (2) the negative implication of a rising wedge, (3) weak technicals, and (4) negative seasonality through October. In my opinion, this adds up to rough sailing for the bulls for several weeks.
Technical analysis is a windsock, not a crystal ball.
http://stockcharts.com/articles/decisionpoint/2016/09/spy-finally-a-breakdown.html
• DiscoverGold
Click on "In reply to", for Authors past commentaries.
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Your Due Dilegence is a must!
• DiscoverGold
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
