SPDR S&P 500 (SPY)

[Sean93]

Technical Analysis! Please read if you are long SPY!!

You know, i got to say. I was pretty confident in this bull market when it broke it's support line. But today we have a problem. Sure the market hasn't retraced that much of our prior rally. But today we seem to have formed a strong reversal day signal.

This is called the downside reversal day. It is when the market sets a new high in the trend and closes below the close of the last day. These signals by themselves are not much significant, however when mixed with other indicators, they can be very reliable.

The RSI indicator is extremely overbought, and the volume today was exceptionally high. These two indicators support the possibility of a bearish market.

Also, i noticed that the high paused at the January 2010 highs, which has now become a confirmed resistance point. All signs are pointing downwards.

How far down this market will go, I'm not sure. However, by applying the elliot wave theory on this market, it looks like this could just be a correction, maybe to the 38% or 50% retracements.

In conclusion, my theory is that the markets should close down for the week. If we manage to bounce off retracements in this downtrend, the bigger picture, the uptrend, may be still in place.

I am hedging my position with puts this week