Daily Archives: June 12, 2010

Point & Figure Charting The Recent SPY Correction (by Jack Damn)

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SPY_pf

Click for bigger chart

This is a look at a Point
& Figure
2-box reversal chart of the SPY (12
June 2010). At best, I think the current price action can be described
as a correction and not major top yet.

Obviously, a major top could be forming and the current descending
formation is definitely bearish, but I view it in
totality as neutral until 106.00 has been resolved to
the downside. Chart data is easily skewed, but looking at at the SPY
this way with the noise removed, we can see that the 106.00
level
is potentially pivotal.

There is a rising 45 degree trend-line coming out of a low support
zone that appears destine up to meet up with the 106 potential support
level. This, along with four recent tests of 106.00, might engender
bullish price action if it holds. In Point & Figure charting, 45
degree trend-lines are quite important, and any violation of them is
seen as an actionable event (i.e., trade worthy). Conversely, their
support is also actionable.

Considering the broadening nature of the 106 area (at the moment, a
Quadruple Bottom) and the approaching trend-line, a violation of this
confluence on heavy volume would be quite bearish and might begin a
price spiral down to the potential support zone of 85-87.

With the current bearish descending pattern in place, a retest of
106.00 isn't out of the question despite the past few days of bullish
bounce.

As always, price is king and all support and resistance levels can
(and will) be broken without warning. I view supply and demand levels
the same way as I view overbought and oversold levels: as potentials and
not absolutes.

Good luck and good trading.

Jack Damn

Originally posted on my Tumblr Blog

Two Roads

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Well, I've got to say, Thursday's mega-rally has really played with my head. I've stared and stared at the charts, and what is in front of us short-term is really murky to me.

On the one hand, I keep wondering if the WAG was right the entire time. There were plenty of folks chirping that the WAG was dead. I'm not so sure. We could be in for a long slog to about 1140 or so into late June.

0612-up

On the other hand, I've noticed a series of consolidations followed by sudden slumps. That kind of outcome would resemble this:

0612-down
 

On the individual chart level, there are many charts that are so battered that it seems that a relief rally has already begun (RIG being a fine example). There are also many charts that, given the year-long rise they enjoyed, seem as vulnerable as ever.

So my confidence in my view of the market's direction is quite low right now. If we cross above 1103 on the September (which is now the front month) e-mini, that definitely helps out the bull case. A break below 1032.25, on the other hand, would amplify the bearish case more than ever.