4/17/2012 SPY #10

S&P 500 (SPY)

(Daily Chart)

-          S&P broke below the upward channel, suggesting a trend reversal.

-          S&P looks like a 1-2-3 down move. The down move came off the top @ $142.21 is the 1^st leg. The 2^nd leg retraced as far as 50% of the 1^st leg move @ $138.99 and retreated, setting up for the 3^rd leg down move and the completion of the 1-2-3 pattern.

• Right now the resistance level @ $138.9 and support level @ $135.76 are the gauges for the 2^nd leg consolidation range. A break of either level will signal the next directional move.

• The 1-2-3 down move pattern will be confirmed when the S&P breaks below the support level @135.76. The 3^rd leg move should take the S&P down to the next support level @ 134.36, where prior pivot low is found.

• On the other hand, if the S&P goes above the resistance level @ $138.9, this signals a possible reversal. The S&P very likely to move back into the upward channel and trade higher. However, do watch out for the 61.8% retracement level @ $139.75, sellers may step in at this level and immediately pushing the S&P back down to the consolidation range, resulting in a bull trap.

-          The S&P is still above the prior pivot low @ $134.36 so this is still an uptrend. A confirmed trend reversal will occur when the S&P develops a lower low underneath the prior pivot low level @ $134.36.

• If the trend does not reverse, it is possible for the S&P to climb back up to the double tops resistance @ $141.87.

(Hourly Chart)

-          Both the double tops and continuation diamond patterns from last post are completed and exhausted.

-          A semi-double tops pattern formed and found resistance @ $138.9. Because the resistance level is in between the gap #2 from $138.27 to $139.64, if the S&P breaks above the resistance level, I expect the stock to rise to gap fill @ $139.64 and consolidate. However, in order to get to gap fill level, the S&P has to clear the 200 SMA (white in color) as well, selling pressure will increase substantially as the stock price approaches the 200 SMA. In addition to the 200 SMA, there is also a 50 SMA (grey in color) running down with the S&P, it will be another source of resistance if the S&P bounces.  

-          To the downside, there is a gap #1 to fill from $136.25 to $136.9. I'm expecting the gap fill to happen tomorrow, because the later the week goes, the lower chance gap #1 will get filled. I think if the S&P breaks below the gap #1 top @ $136.9, it should retreat down to gap #1 bottom @ $136.25 immediately.

-          Major support should be found @ $135.75. If this level does not hold, there is plenty of clear space for the stock price to run down to the next support level @ $134.36 since there isn’t any underlying support between these 2 levels.

(15 Minutes Chart)

-          The S&P has been stair-stepping lower within a downward channel in the last 2 trading days. Notice each subsequent high is lower than the previous one (Lower Highs, High #1 > #2 > #3) and each subsequent low is lower than the previous one (Lower Lows, Low #1 > #2 ), I'm expecting the S&P to trade within this channel for another day or two and form the 3^rd lower low by Wednesday.

I hope this post offers you some insight, thank you for reading and please feel free to give me some feedback.