Luna $ Ticks

August 26, 2008

Banging the head on the floor

Filed under: Trading SPX SPY — moontrader @ 3:19 pm

Market today revisited, or better, traded around SPY Daily DMA 25×5 – most of the day below it. Watching closely the Daily chart:

If you notice, there’s a floor SPY has been banging the head against in the last two weeks and that is around 126.60. That seems to be a solid concrete floor: lately, every time SPY touches it, it bounces back up. Where does that come from on a broader context?

This is something extremely important I learned from Tim Knight, which I mentioned before in a couple of posts: use different tops and bottoms with fibonacci retracements to find the one that most conforms to market action.

Above is the 126.60 in a broader context, using the 120.02 bottom (July, 15th, 2008) with the top of 150.58 (December, 11th, 2007), which is the beginning of a major fall. This makes that a significant top, and the proof is that prices snap to fib proportions perfectly in many points: just take a look at the full resolution chart (click on the chart below – I’ll not circle the points to avoid cluttering a simple and clear chart, but they are pretty obvious).

I’m also showing the 129.30 level, which seems to be an important short term roof. As soon as it’s breached, prices should rush towards 132.5.

To my satisfaction, SPY ended today’s session at 127.40, which is above Daily DMA 25×5 (127.26), around DMA 3×3 (127.46), while MACD’s fast line remained in positive territory – although today we had another flirt with disaster. Convergence between DMA 25×5 and 3×3, plus MACD in positive territory: good chance of a rally tomorrow.

For a quick and easily manageable trade, I would recommend going long and having SPY 126.40 as the stoploss. I myself won’t be doing anything. I prefer to just sit and watch, while saving some energy for an opportunity that is approaching on the short side. Bear hibernation hasn’t finished yet, but is about to in the next days.

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5 Comments »

  1. Dude, nice charts. i am in agreement with you. It might take a couple of days for this to work out, but I cant wait.

    I wouldnt say that you spammed me over from OA, but I can looking out of couriosity.

    Comment by Rake — August 26, 2008 @ 6:43 pm | Reply

  2. Using the 3 recent higher lows and the 126.4 level you could draw a decending triangle and play the break. The problem I see is the lack of volume, if everyone comes back on September 2nd and decides the market is cheap we could run up a couple hundred points. I would think a lot of people are positioning for a move down so a 200+ run would flush a lot of shorts out of the markets. I’ll side up with you Moon and sit it out for a little while

    Comment by Jigsaw — August 26, 2008 @ 9:55 pm | Reply

  3. Thanks Rake.
    Jigsaw, I agree with you. We need a wash-and-rinse before the real breakout happens. Waiting is still the best strategy for now.

    Comment by moontrader — August 26, 2008 @ 10:08 pm | Reply

  4. This is the 3rd blog I’ve been to that says a break below 126.6 is bad. Hmmm.
    I held 1/2 my shorts and got rid of half my longs today. half and half,
    Hey at least I’m making a tiny amount each day.

    Comment by zstock — August 27, 2008 @ 3:24 am | Reply

  5. Hey Zstock, how many blogs say that we’re in a short-term uptrend, and that we’ll reach SPY 132.55 on or around September 2nd? (I do hope that happens)

    Comment by moontrader — August 27, 2008 @ 3:51 pm | Reply


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