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Post Market Analysis, Monday October 5: Bullish

nice pop in the markets today

nice pop in the markets today

The markets bounced today on moderate volume. The VIX posted a 6.24% drop which confirms the move. I normally like to see the VIX move three times the inverse of the markets. It is important to note that the volume was not very high today, which detracts from the significance of this bounce.

This recent down turn over the second half of September could be forming a bull flag on the SPY daily chart. If that is the case, we could easily see a nice run past the highs for the year, testing major resistance at the 110 area. After that, the next major area of resistance would be the 120/122 area. This pull back could behave similarly to the pull back we saw in June.

On the other hand, we are still in a downtrend as long as we continue to make lower lows and lower highs. The thick orange line on my chart is still relevant. I would like to draw your attention to the mediocre volume today. Also notice the negative histogram ticks and continued bearish indications of the MACD. I expect to see the SPY lose momentum again and put in a lower high around 105. We have support at 102.5, 100, and the 50 day moving average. If SPY starts busting through those support areas, things could get very hairy and very fast. As long as the market remains bearish, I will trade it to the downside.

2009-10-05_daily_chart