On technical side, SPY is forming a wedge and could go higher after the wedge breaks up. The upper bound trend line has been tested many times since 2009. The monthly chart is still healthy, all the Moving Averages are trending up and parallel to each other. So we could still see some continuation in the up move.
On fundamental side, US economy has been waking up. The expectation of quarterly GDP growth rate has been increasing since 2014. Unemployment situation is getting better. Fed exited QE based on the recent healthy growth of economy. The macro data of the last quarter is doing well. The expectation of GDP growth rate increased to 5 year high and the real number exceeded the expectation. The sector rotation right now shows the "safe harbor sectors" such as utilities are hot. Usually when these sectors becoming hot, the market is going towards it's potential peak. But right now it's still not there yet, at least SPY hasn't yet given us any signal that it's reaching peak. We could still see some continuation of up trend. Fed is expected to announce raising interest rate in May 2015, which is detrimental to the market. So the timing of my measure move points to May 2015 as the end of the coming round of rally. The expectation is about to digest by the market then.
Comments
LiyouZhang
⋅
New updates on this trading idea.
Today SPY is approaching the upper trend line of this potential wedge. This afternoon EST, ECB announced they refuse to allow greek bonds to be used as collateral in monetary operations. The annoucement puts Greece in even more dangerous position of bank crisis. If they can not use their bonds as collateral, what else can they use? Meanwhile, SPY flushed in the last two 15min bars. Overall, today's bar is a shooting star in the high, which lines up with the ECB annoucement. It's not a good sign. And stochastic indicator is in oversold area again. Let's see if it make a small pullback in the following days.
LiyouZhang
⋅
Today's it tried to break down but got strongly bought up and closed as a green hammer with long a tail. It's a strong reversal signal. And also, it holds the trend line of the wedge well. The low end of today's tail is right above the 200MA. I expect SPY to start to move up from tmrw. Now it's more and more likely it's gonna form a complete wedge.
LiyouZhang
⋅
Since my trading idea is SPY wedge breakup, now could be a good time to build long position.
LiyouZhang
⋅
So it holds above 198.55 well. It gave us a hammer today and in after hours AMZN went up a lot, GOOGL did well too. Usually it's a good sign for SPY. Let's see if SPY will keep on going up tmrw. We still need one more day to confirm if it really holds above 198.55. If it does, then it's more and more likely to form a wedge now.
LiyouZhang
⋅
So SPY pulls back as I expected in my trading idea. Today it gives us a solid red bar that engulfs the prior doji. Today it gapped up and flushed. We can see some downwards continuation in the following trading days. Let's see if it holds above the 198.55 level.
I will keep on posting my follow-up thoughts on my trading idea as the market fluctuates. Hope these thoughts are constructive to the viewers.
LiyouZhang
⋅
We can see the stochastic indicator of SPY on daily is already in oversold area. So the temporary pullback of SPY is predictable. Let's see what will happen after pull back finishes. I still believe SPY is gonna form the wedge and then break up.
LiyouZhang
⋅
And this pullback also confirmed the temporary trendline at the upper bound of the forming wedge.
Today SPY is approaching the upper trend line of this potential wedge. This afternoon EST, ECB announced they refuse to allow greek bonds to be used as collateral in monetary operations. The annoucement puts Greece in even more dangerous position of bank crisis. If they can not use their bonds as collateral, what else can they use? Meanwhile, SPY flushed in the last two 15min bars. Overall, today's bar is a shooting star in the high, which lines up with the ECB annoucement. It's not a good sign. And stochastic indicator is in oversold area again. Let's see if it make a small pullback in the following days.