Wednesday, May 6, 2009

SPY's low volume "melt-up"

SPY has shown a very constructive pattern with higher highs and higher lows with healthy pull backs along the way.

The sentiment has changed from bearish to bullish over the past few weeks and now managers are calling for everyone back into the pool.  Very confident.  I'm sure they all dressed up their portfolios in time for the April statements coming out this week (I got mine and it's full of wonderful stocks that have done so so well these past 8 weeks!)  So if these managers had not bought last week before April 30th, why would they buy now?

Although the banks stress tests are coming out Thursday and rumor is that 10 of the 19 banks will need to raise capital, no fear!  XLF goes stratospheric.... on low volume.  For all the bullish talk from Pisani and Kneale, we didn't see a whole lot of participation in the recent leg up this week.

The SPY has bounced off the lower trend line 3 times since the "Hal Turner" April 20th near-term bottom.  The previous trendline (upper red) was lost but now recently regained again.  The middle red trendline is the one to watch.  Also, the 200d MA is the Holy Grail on everyone's radar, but seems miles away and attainable only after much more constructive work on these pushes higher.  Can it be done?  And when it's reached, then what another parabolic rise?

A drop below this trend could see renewed confidence in the bears who will sell the news of the stress tests and the NFP.   My hunch is that we get the overdue pullback soon (S&P futures are down 11 as I type), perhaps to 89 or lower and then we need to all watch the trend lines to see which one is violated.

Full disclosure: I'm net short various components of  XLF and SPY as of noon today.  Stops on the swing trades are set, but truly I think this sucker breaks down.  Oh yeah, most important: don't ever take trading and investment advice from knuckleheads on the internets like me.


  1. when the vix is 30 and you have a 200 pt move or so...

    it's a wave 3 type move, and it needs to slow down to "top"... so One expects another high...or 2 or 5

  2. but... you did point out something I didn't

    have we had 3 tests of the trendline?