Wednesday, February 15, 2012
SPY Big Picture
I wish I had this chart drawn back in the summer of 2011 -- drawing a parallel line of the highs of 2010 and 2011 and placing it at the 2009 low to form a channel. The resulting lower channel line touches exactly the 2011 low. I've seen this kind of price action numerous times in the intraday charts as well. But one has to be prepared and place the limit order ahead of time because this often occurs during a stop run.
We can also see the current price, as well as the 2011 high are at the Fib 76.4% retracement level.
Mathematical precision rules in the madness of the stock market. One just needs the discipline to plan the trades and the patience to wait for the trades to come to you. But it is surely easier said than done.
In the big picture, the up trend is still intact. MACD and RSI both are doing just fine. The fact that we're over bought and that we are at the crucial Fib level does warrant some sideways consolidation or preferably a correction down to the 70 week moving average (green line).
The monthly chart which isn't shown does exhibit a severe MACD negative divergence, but the MACD is still rising. We'll need to keep a close eye on that.