$SPY July 2013 High Probability Entry Points

The hourly chart above shows the decline in the SPY since May 22. As of Friday, June 28 close, prices sit in the middle of a minor downtrend channel , derived from the downtrend line drawn across the May 22 and June 18 tops.

In my analysis of the weekly chart of SPY I call for a decline through the end of the year. The purpose of this analysis will be to pinpoint high probability entry points to take advantage of the long term forecast.

On Thursday and Friday June 27 and 28 prices settled into a $2 range between $160 and $162, exactly in the middle of the trend channel. Traders should be cautious to enter trades here as probabilities of a break in either direction are about equal. Waiting for high probability entry points that allow traders to place tight stops is critical to ensuring long term profitability.

The yellow and purple triangles highlight potential price movements for the month of July. In the next week it is difficult to say, with any certainty, in which direction prices will break out of the $ 160 to $162 range. Momentum from the short term up wave beginning June 24 suggest prices could reach the upper boundary of the trend channel sooner rather than later, while the distribution patterns on the daily and weekly charts suggest further declines. It is also possible to see prices continue to move sideways within the range.

However the push and pull of prices plays out over the next week to month, traders are advised to wait for prices to test the boundaries of the trend channel before entering positions. There are two scenarios I am looking for which would justify entering a short position in the next month.

First, if prices continue sharply higher in the next week (on continued weak volume ) and test the downtrend line and resistance around $164. This is the ideal situation, allowing us to place a tight stop above $164. As I stated in my long term analysis last week, $164 is the last resistance level before I will re-evaluate my bearish bias ( SPY Down Through Year End).

Second, prices may decline this week to test the lower boundary around $157 - $158. In this case, I will be watching for a rally to resistance and the 50 day moving average around $162 to get short.

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Since Monday's Gap up SPY has been testing the downtrend line from the May top. Looking to get short between $165 and $166. As long as volume isn't suspiciously strong on the rallies this is likely a short squeeze where the big traders slowly mark up prices targeting a price where stop orders of smaller traders are placed. Looking to take profits between $162 and then $160.
QuantitativeExhaustion StockMarketMonk
decent volume today... what you think now ?
Do you have a smaller EW count for this time frame?
This is probably a better chart. The yellow and purple zones are reversal areas with favorable risk/reward ratios.