SPY - There is something here for everyone...
This is a DAILY chart of the SPY. Every candle represents one trading day...
Let me start with some historical stuff and work my way to the present.
At the bottom left of this chart you will notice the green circle which is the beginning of the 2016 Uptrend Line. In June of 2016 the SPY made a higher low (see the 2nd green circle) and that is how I was able to draw the 2016 Uptrend Line. Remember, you always need at least two points to draw a line... The SPY had stayed above the 2016 Uptrend Line until this week. Now the SPY is flirting with dropping below it.
There is a horizontal gray line at $194 ish. This line was drawn some time ago because it is a line of support and resistance. Let's just agree that support and resistance lines are good places to look for a change in direction. It doesn't always work and some folks don't believe in horizontal lines but I personally like to use them as reference levels.
Since we are already talking about horizontal lines, there is one more that is around the $212 level. Again you can take it or leave it but in June this line acted as resistance and in September the same line acted as support. Now that we are in October, this $212 ish level is in play again. We will have to see what happens in the coming days or weeks.
Now for the present...
Do you have a head & shoulders? The answer to this question is obvious. All of us do. Now, does this chart have a "head & shoulders" pattern? You get to answer this question for yourself. If you see one at the top right of this chart (see the three horizontal segments), then you would probably say this market is going lower. Believers in this type of pattern will also tell you there is a target price based on a measured move. You will have to ask one of them about that. I am just going to say that I don't look for head & shoulder patterns as part of my technical analysis.
Since the beginning of September, you should notice the SPY has been in a range. If you didn't notice, take a look at the shaded rectangle. I would say the range is from 212ish to 217ish. This is important because you can expect back & forth action until it breaks out of the range.
There is a dashed green uptrend line that I labeled the One Month Uptrend Line. If the SPY was going to go higher from here, it would not have dropped below this uptrend line. Maybe the SPY will go lower from here instead. Or maybe another short term uptrend line will appear and the SPY will go higher from there...
The 100 day moving average is plotted on the chart in gray. You should notice that we now have three out of the last four closes below the 100 ema. Since the 100 ema is now beginning to angle down, the only way that will change is for the SPY to start closing above the 100 ema again. Until then, expect lower prices as the norm.
Now that we are at the end of this idea, let's talk about the red downtrend line. At the moment, this red downtrend line and the 2016 Uptrend Line are the two most important lines on this chart to me. This red downtrend line is fairly short so it may not be the most accurate. But it is the best we have for now. If this red downtrend line holds, and the SPY drops below the green 2016 Uptrend Line, then you can expect a lower SPY and maybe even a spike in volatility. If the green 2016 Uptrend Line hold and the SPY crosses over the red downtrend line, then you can expect a higher SPY.
Limit Your Risk
Protect Your Profits
Trade What You See! Not What You Hope, or Feel, or Think, or ...
Let me start with some historical stuff and work my way to the present.
At the bottom left of this chart you will notice the green circle which is the beginning of the 2016 Uptrend Line. In June of 2016 the SPY made a higher low (see the 2nd green circle) and that is how I was able to draw the 2016 Uptrend Line. Remember, you always need at least two points to draw a line... The SPY had stayed above the 2016 Uptrend Line until this week. Now the SPY is flirting with dropping below it.
There is a horizontal gray line at $194 ish. This line was drawn some time ago because it is a line of support and resistance. Let's just agree that support and resistance lines are good places to look for a change in direction. It doesn't always work and some folks don't believe in horizontal lines but I personally like to use them as reference levels.
Since we are already talking about horizontal lines, there is one more that is around the $212 level. Again you can take it or leave it but in June this line acted as resistance and in September the same line acted as support. Now that we are in October, this $212 ish level is in play again. We will have to see what happens in the coming days or weeks.
Now for the present...
Do you have a head & shoulders? The answer to this question is obvious. All of us do. Now, does this chart have a "head & shoulders" pattern? You get to answer this question for yourself. If you see one at the top right of this chart (see the three horizontal segments), then you would probably say this market is going lower. Believers in this type of pattern will also tell you there is a target price based on a measured move. You will have to ask one of them about that. I am just going to say that I don't look for head & shoulder patterns as part of my technical analysis.
Since the beginning of September, you should notice the SPY has been in a range. If you didn't notice, take a look at the shaded rectangle. I would say the range is from 212ish to 217ish. This is important because you can expect back & forth action until it breaks out of the range.
There is a dashed green uptrend line that I labeled the One Month Uptrend Line. If the SPY was going to go higher from here, it would not have dropped below this uptrend line. Maybe the SPY will go lower from here instead. Or maybe another short term uptrend line will appear and the SPY will go higher from there...
The 100 day moving average is plotted on the chart in gray. You should notice that we now have three out of the last four closes below the 100 ema. Since the 100 ema is now beginning to angle down, the only way that will change is for the SPY to start closing above the 100 ema again. Until then, expect lower prices as the norm.
Now that we are at the end of this idea, let's talk about the red downtrend line. At the moment, this red downtrend line and the 2016 Uptrend Line are the two most important lines on this chart to me. This red downtrend line is fairly short so it may not be the most accurate. But it is the best we have for now. If this red downtrend line holds, and the SPY drops below the green 2016 Uptrend Line, then you can expect a lower SPY and maybe even a spike in volatility. If the green 2016 Uptrend Line hold and the SPY crosses over the red downtrend line, then you can expect a higher SPY.
Limit Your Risk
Protect Your Profits
Trade What You See! Not What You Hope, or Feel, or Think, or ...
