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Chart from January 20th blog post regarding the April top …
Here is the chart from today at 11:45 am …
A wise man once said that if the market doesn't do what it is "supposed" to do … expect a strong reaction in the opposite direction. He also said market history doesn't repeat exactly, but sometimes it sure rhymes.
Lock and Load people … time to kill some bulls
Cheers … Leaf_West
As I am sitting here on Wednesday pre-Fed I decided to look at the daily SPY chart and what I saw made me dust off my Jan 20th blog …. enjoy, you Leaf_West haters!
Back on Jan 20th I posted a blog that compared the topping action to the then current conditions of the SPY (see Jan 20th blog). What started my thinking on Jan 20th was the possible "shot across the bow" that often are evident at the start of a topping process.
After the first shot across the bow in April, the market grinded higher … I pointed this out and posted the following chart:
Hey guys … I'm not sure if any one here on Tim's site wants a recap of the trade set-ups in the SPY for Monday … if not just move along. I just noticed the "hating" going on in the comments for my AAPL Friday trading analysis. I guess Tim's site is the wrong location for educational posts on intra-day trading … therefore this will be my last one.
The SPY action today pretty much stuck to the script that we have been expecting. For those who aren't up to speed, go back and read my blogs comparing the current action to April and read the portion of this week's newsletter that deals with the potential topping patterns (making an ABC as part of the second leg higher).
Here we go …
As we all know AAPL is an incredibly important stock in terms of its investor following and its index weighting. If any stock today can give us insight into the market's animal spirits, AAPL would be the one.
I'm going to blog about AAPL in two parts … the first one is just an analysis of the trading of AAPL on Friday based on the 5-min chart. Nothing more, nothing less … just looking at how you should have traded AAPL on Friday without any bias from higher time frames.
The reason I think reviewing a day's trading set-ups as being important is that these methods/set-ups repeat. Not only for AAPL or the SPY, but in all stocks/ETF's. If you don't believe me, go back and look at my SPY trading analysis … you'll see the same thing over and over. Again, its all about becoming a better fisherman.
My Part II blog will be a more in-depth analysis of AAPL on higher time frames. Included will be some analysis of what to look for in signals or signs in the days ahead. This will be a part of my weekly newsletter which goes out on Sunday evening (make sure you sign up for it!!).
So, let's get started:
Sorry to Tim … I drafted this post Thursday pre-market by taking a quick copy/paste from my own blog from my site … the pictures didn't work so Tim could not post it. I did a follow-up post after the market closed on Thursday so I will add that to the bottom of the original post. I think it is worth the read so I hope you all enjoy it.
======== Original Post pre-market on Thursday =============================================
So was yesterday's action a warning shot across the bow, pointing to more weakness in the days ahead? There were plenty of technical reasons why a pull-back in the equity markets was overdue. I'm not going to go into those with this blog post … I wanted to talk more about what we should be looking for in the immediate few days ahead.
There is an old adage that tops are a rounded and bottoms can be "V" in shape (quick, strong thrusts). If we are making a top in the equity market, the process should take several days before the real fireworks start. If all we are doing is making a minor correction on the way to higher levels, we will again do that over several days.
I've gone over how to monitor a change in direction with earlier posts, so I won't re-hash that. What I'm going to do with the rest of this blog is to try and look back at a recent period of topping action to give people a reminder of what the next few days could look like.
It is very rare to find any two periods in time to be identical, but they often will look alike. So having that caveat out there, I would like to look more closely at the topping action from back in April 2010.
Now the action in April 2010 came at a different spot in the larger trend … just as an example of that, the April rally end came after only an impulsive move that was 54 days long. The move off of the July lows on this thrust is already at 138 days. QE2 has been very good for investors.
Enough with the PG movie warnings … how was April's topping action??
